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Questions and Answers
What branch of mathematics is useful for determining optimal values when functions such as inventory costs need to be maximized or minimized?
Calculus
Which mathematical technique is extensively used in making product mix decisions, minimizing transportation costs, and planning production schedules?
Mathematical programming
What type of probabilities are used in statistical analysis when dealing with risk and uncertainty situations?
Objective and subjective probabilities
What technique is useful in analyzing service systems by focusing on waiting-time length and mean waiting time?
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Which mathematical logic provides deterministic solutions like break-even analysis and benefit-cost analysis?
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What technique is used for forecasting demand by analyzing correlations and regression?
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What is the essence of simulation?
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What are computer simulations valuable tools for?
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What do heuristic methods involve?
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What do network analysis techniques include?
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What does utility theory allow decision-makers to incorporate into decision structures?
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Under extreme uncertainty, what strategies can be used to make decisions?
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Study Notes
Complete Certainty Methods
- All relevant information about decision variables and outcomes is known or assumed to be known under complete certainty conditions.
- Algebra provides deterministic solutions, such as break-even analysis and benefit cost analysis, with valid assumptions.
- Calculus is used to determine optimal values where functions need to be maximized or minimized.
- Mathematical programming is applied to make product mix decisions, minimize transportation costs, plan and schedule production, and more.
Risk and Uncertainty Methods
- Risk and uncertainty situations involve probabilistic information about decision variables or outcomes.
- Statistical analysis techniques include: • Objective and subjective probabilities • Probability and probability distribution • Estimation and tests of hypothesis • Bayesian statistics • Decision theory • Correlation and regression for forecasting demand • Analysis of variance
- Queuing theory analyzes queues in terms of waiting-time length and mean waiting time for service systems, maintenance, and shop floor control.
- Simulation duplicates the essence of an activity and is useful for analyzing investment outcomes, production processes, scheduling, and maintenance.
- Heuristic methods involve a set of rules to facilitate solutions for scheduling, layout, and distribution problems.
- Network analysis techniques include: • Decision trees • CPM (Critical Path Method) • PERT (Program Evaluation and Review Technique)
- Utility theory allows decision-makers to incorporate their own experience and values into a relatively formalized decision structure.
Extreme Uncertainty Methods
- Under extreme uncertainty, no information is available to assess the likelihood of alternative outcomes.
- Game theory helps decision-makers choose a course of action when there is no information about what conditions will prevail.
- Coin flipping is sometimes used in situations where decision-makers are wholly indifferent.
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Description
Explore methods used under complete certainty conditions in decision making, where all relevant information about decision variables and outcomes is known or assumed to be known. Learn about the application of algebra and calculus to analyze certainty and uncertainty scenarios.
