IBM401 Lecture 11

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IBM401 Lecture 11

  1. 1. Quantitative Analysis for Business<br />Lecture 11<br />September 20th, 2010<br />http://www.slideshare.net/saark/ibm401-lecture-11<br />
  2. 2. Example i<br />Table on the left is cost of operating a machine at different age of the machine in years<br />Find average cost of maintaining the machine<br />How much does the cost deviate from year to year?<br />Find sample covariance between cost and age<br />How much does the cost increase each year?<br />Estimate the operating costs of <br />0-year-old machine<br />10-year-old machine<br />
  3. 3. Example ii<br />Plastic tube is extruded from 3 machines according to tube length. Unit cost for tube is 20B per cm. The setup cost of as shown in table. <br />Find cost estimation equation for all 3 machines<br />List price for plastic tube from 1m to 15m.<br />
  4. 4. Example iii<br />At a unit price of $25, weekly demand for a product is 300 units. At a unit price of $40, the weekly demand is 150 units. <br />Find an estimated linear model between weekly demand and unit price. <br />What is the best estimation price point to meet weekly demand of 500 units?<br />
  5. 5. Example iv<br />
  6. 6. solutions<br />
  7. 7. Example i<br />Find average cost of maintaining the machine<br />How much does the cost deviate from year to year?<br />Find sample covariance between cost and age<br />
  8. 8. Example i<br />How much does the cost increase each year?<br />Estimate the operating costs of <br />0-year-old machine<br />10-year-old machine<br />
  9. 9. Example ii<br />Find cost estimation equation for all 3 machines<br />Cost = 200 + 20L for L < 5<br />Cost = 500 + 20L for 10 <= L <= 5<br />Cost = 800 + 20L for L > 10<br />List price for plastic tube from 1m to 15m.<br />
  10. 10. Example iii<br />Find an estimated linear model between weekly demand and unit price. <br />Two conditions given for this relationship<br />Demand = b0 + b1P<br />300 = b0 + b1(25)<br />150 = b0 + b1(40)<br />Solving those 2 equations<br />b0 = 550<br />b1 = -10<br />What is the best estimation price point to meet weekly demand of 500 units?<br />P = (Demand – b0)/b1<br />P = (500 – 550)/(-10) = 5<br />
  11. 11. Example iv<br />
  12. 12. Example iv<br />

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