Republic of the Philippines

City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

Quantitative Methods
Module 1: Introduction to Quantitative Analysis

Name (LN,FN,MN): ________________________________ Program/Yr/Block: ___________

I. Introduction
Quantitative methods emphasize objective measurements and the statistical,
mathematical, or numerical analysis of data collected through polls, questionnaires, and
surveys, or by manipulating pre-existing statistical data using computational techniques.
In this course, we will introduce you to the quantitative analysis approach:

• Defining the Problem

• Developing a Model
• Acquiring Input Data
• Developing a Solution
• Testing the Solution
• Analyzing the Results
• Implementing the Results

We will use computers and spreadsheet models to demonstrate mathematical

analysis. It features calculation methods for Program Evaluation Review Technique, Linear
Programming, Decision Analysis, Transportation problem, Statistical functions, etc.

II. Learning Objectives

After completing this module, you should be able to:

1. Describe the quantitative analysis approach.

2. Understand the application of quantitative analysis in a real situation.
3. Describe the use of modeling in quantitative analysis.
4. Use computers and spreadsheet models to perform quantitative analysis.
5. Discuss possible problems in using quantitative analysis.
6. Perform a break-even analysis.

Topics and Key Concepts

A. What is Quantitative Analysis?

Quantitative analysis is a scientific approach to managerial decision making

whereby raw data are processed and manipulated resulting in meaningful information

Prepared by: Ms. Liezel T. Armada 1

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

 Quantitative factors might be different investment alternatives, interest rates,

inventory levels, demand, or labor cost
 Qualitative factors such as the weather, state and federal legislation, and
technology breakthroughs should also be considered
o Information may be difficult to quantify but can affect the decision-making
process

Examples of Quantitative Analysis:

❖ Taco Bell saved over $150 million using forecasting and scheduling quantitative
analysis models
❖ NBC television increased revenues by over $200 million by using quantitative
analysis to develop better sales plans
❖ Continental Airlines saved over $40 million using quantitative analysis models
to quickly recover from weather delays and other disruptions

B. The Quantitative Analysis Approach

1. Defining the Problem

 Need to develop a clear and concise statement that gives direction and
meaning to the following steps
o This may be the most important and difficult step
o It is essential to go beyond symptoms and identify true causes
o May be necessary to concentrate on only a few of the problems –
selecting the right problems is very important
o Specific and measurable objectives may have to be developed

Prepared by: Ms. Liezel T. Armada 2

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

2. Developing a Model

 Quantitative analysis models are realistic, solvable, and understandable

mathematical representations of a situation

 There are different types of models

 Models generally contain variables (controllable and uncontrollable) and

parameters
o Controllable variables are generally the decision variables and are
generally unknown
o Parameters are known quantities that are a part of the problem

3. Acquiring Input Data

 Input data must be accurate – GIGO rule

 Data may come from a variety of sources such as company reports,

company documents, interviews, on-site direct measurement, or statistical
sampling

4. Developing a Solution

 The best (optimal) solution to a problem is found by manipulating the

model variables until a solution is found that is practical and can be
implemented
 Common techniques are
o Solving equations
o Trial and error – trying various approaches and picking the best
result
o Complete enumeration – trying all possible values
o Using an algorithm – a series of repeating steps to reach a solution

Prepared by: Ms. Liezel T. Armada 3

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

5. Testing the Solution

 Both input data and the model should be tested for accuracy before
analysis and implementation
o New data can be collected to test the model
o Results should be logical, consistent, and represent the real
situation

6. Analyzing the Results

 Determine the implications of the solution

o Implementing results often requires change in an organization
o The impact of actions or changes needs to be studied and
understood before implementation

Sensitivity analysis determines how much the results of the analysis will
change if the model or input data changes
o Sensitive models should be very thoroughly tested

7. Implementing the Results

 Implementation incorporates the solution into the company

o Implementation can be very difficult
o People can resist changes
o Many quantitative analysis efforts have failed because a good,
workable solution was not properly implemented
 Changes occur over time, so even successful implementations must be
monitored to determine if modifications are necessary

C. How to Develop a Quantitative Analysis Model

Mathematical model of profit: Profit = Revenue – Expenses

Expenses can be represented as the sum of fixed costs and variable costs are the
product of unit costs times the number of units

Profit = Revenue – (Fixed cost + Variable cost) where,

Profit = (Selling price per unit)(number of units sold) –
[Fixed cost + (Variable costs per unit)(Number s = selling price per unit
of units sold)] v = variable cost per unit
Profit = sX – [f + vX] f = fixed cost
Profit = sX – f – vX X = number of units sold
Note: The parameters of this model are f, v, and s
as these are the inputs inherent in the model
The decision variable of interest is X

Prepared by: Ms. Liezel T. Armada 4

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

Example: Bagels ‘R Us

Assume you are the new owner of Bagels ‘R Us and you want to develop a
mathematical model for your daily profits and breakeven point. Your fixed overhead
is $100 per day and your variable costs are 0.50 per bagel (these are GREAT bagels).
You charge $1 per bagel.

Profits = Revenue – Expenses

(Price per Unit) x - Fixed Cost

(Number Sold) - (Variable Cost/Unit) x
(Number Sold)

Profits = $1 * Number Sold – $100 - $0.50 * Number Sold

Breakeven Example

Break-even point (BEP) - is the number of units sold that will result in $0 profit.

f = $100, s = $1, v = $.50 0 = sX – f – vX, or 0 = (s – v)X – f

f = (s – v)X
X = f/(s-v)
f
X = 100/(1-.5) X=
s–v
X = 200
Fixed cost
BEP =
(Selling price per unit) – (Variable cost per unit)
At this point, Profits are 0

D. Advantages of Mathematical Modeling

1. Models can accurately represent reality

2. Models can help a decision maker formulate problems
3. Models can give us insight and information
4. Models can save time and money in decision making and problem solving
5. A model may be the only way to solve large or complex problems in a timely
fashion
6. A model can be used to communicate problems and solutions to others

E. Models Categorized by Risk

 Mathematical models that do not involve risk are called deterministic models
o We know all the values used in the model with complete certainty
 Mathematical models that involve risk, chance, or uncertainty are called
probabilistic models
o Values used in the model are estimates based on probabilities

Prepared by: Ms. Liezel T. Armada 5

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

F. Computers and Spreadsheet Models

QM for Windows

Microsoft Excel QM

Prepared by: Ms. Liezel T. Armada 6

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

Teaching and Learning Materials Resources

• PC Computer | Laptop | Android Phone
• GC LAMP
• Google Meet
• Facebook Messenger

Learning Tasks
A. Explore

a. Watch a YouTube Video entitled: Decision-Making in Organizations.

(https://tinyurl.com/lesson1QM) After watching, list a few things you learned
from the video. (15 points)

Things I have learned:

1. _______________________________________________________
2. _______________________________________________________
3. _______________________________________________________

B. Explain

a. Why is it important to calculate breakeven point (BEP)? (10 pts)

_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

b. How quantitative analysis approach are useful in management? (10 pts)

_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

Prepared by: Ms. Liezel T. Armada 7

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

C. Engage

a. Answer the following: (5 pts. each)

1. Selling price is $1.50, cost/bagel is $.80, fixed cost is $250. Compute for
Breakeven point?
2. Seeking a profit of $1,000, selling price is $1.25, cost/bagel is $.50, 100
sold/day. What is fixed cost?

b. Answer the following: (5 pts. each)

The company buys, sells, and repairs old clocks. Rebuilt springs sell for $10 per
unit. Fixed cost of equipment to build springs is $1,000. Variable cost for spring
material is $5 per unit.

1. Compute for profit if sales is 500.

2. Find BEP.
3. Is there a profit in 150 units sales? Explain.

c. Answer the following: (5 pts)

Seeing a need for childcare in her community, Sue decided to launch her own
daycare service. Her service needed to be affordable, so she decided to watch
each child for $12 a day. After doing her homework, Sue came up with the
following financial information:

- Selling Price (per child per day) $12

- Operating Expenses (per month)
- Insurance 400 + Rent 200 = Total OE $600
- Costs of goods sold $4.00 per unit
o Meals 2 @ $1.50 (breakfast & lunch)
o Snacks 2 @ $0.50

How many children will she need to watch on a monthly basis to breakeven?

Prepared by: Ms. Liezel T. Armada 8

 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, Donor St., East Tapinac, Olongapo City
www.gordoncollege.edu.ph

References
1. Render, Stair, Hannah. 2012. “Quantitative Analysis for Management Global
Edition 11th Edition. Retrieve from:
https://wps.pearsoned.co.uk/ema_ge_render_qam_11/202/51951/13299709.c
w/-/t/index.html
2. Gavoor, M. (2020, January 12). SBNM 5411 Lecture 1: Introduction to
Quantitative Analysis [Video]. YouTube.
https://www.youtube.com/watch?v=QUZRxqGVvX8
3. Babbie, Earl R. The Practice of Social Research. 12th ed. Belmont, CA: Wadsworth
Cengage, 2010; Muijs, Daniel. Doing Quantitative Research in Education with
SPSS. 2nd edition. London: SAGE Publications, 2010.

Prepared by: Ms. Liezel T. Armada 9