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Module 1- Introduction to Management Science

The document provides an introduction to Management Science, emphasizing its application in solving management problems and its relevance to accounting. It outlines the steps involved in the Management Science approach, including problem observation, definition, model construction, solution, and implementation. The document also highlights specific business applications of Management Science in addressing issues like excess cash and inventory overstocking.

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marananraine9
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2 views

Module 1- Introduction to Management Science

The document provides an introduction to Management Science, emphasizing its application in solving management problems and its relevance to accounting. It outlines the steps involved in the Management Science approach, including problem observation, definition, model construction, solution, and implementation. The document also highlights specific business applications of Management Science in addressing issues like excess cash and inventory overstocking.

Uploaded by

marananraine9
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Batangas State University

ARASOF-Nasugbu Campus
The National Engineering University

Introduction to
Management Science

Prepared by: John Rafael R. Pelo, CPA


Objectives
Explain the concept of Management Science and how it is applied
in the business world.

Connect the concept of Management Science to the Accounting


course

Know the Management Science Approach to Problem Solving

Focus
What is
Management Science?
According to Bernard Taylor (2013), it is an application
of scientific approach to solving management problems
to help manager make better decisions.

It encompasses a number of mathematically oriented


techniques and logical approach to problem solving.

Can be used in a variety of organizations to solve many


different problems.

Also referred to as operations research, quantitative


methods, quantitative analysis and decision sciences,
How does Management Science relate to
Accounting?

Management Science Accounting


it is a discipline whose application to it provides financial information that
resolving business problems is of are useful in making informed
great significance. economic decisions.
Business Application #1

Problem Accounting Management Science


Excess cash Cash Flow Analysis Capital Budgeting
Financial Statement Cost of Capital
Cost Accounting Working Capital Management
Business Application #2

Problem Accounting Management Science


Overstocking of Financial statement Economic order quantity
inventory Inventory records
Observation

The
Problem Definition
Management
Science Model construction

Approach to
Problem Model solution

Solving
Implementation
1 Observation
• Identification of a problem that exists in an organization.
• They are normally identified by the manager because they
work in places where problems might occur.
• Problems can also be identified by a management
scientist, a person skilled in the techniques of
management science and trained to identify problems, who
has been hired specifically to solve problems using
management science techniques.
2 Definition of the Problem
• Once it has been determined that a problem exists, the
problem must be clearly and concisely defined.
• Improperly defining a problem can easily result in no
solution or an inappropriate solution.
3 Model Construction
• A management science model is an abstract
representation of an existing problem situation. It can be
in the form of a graph or chart, but most frequently a
management science model consists of a set of
mathematical relationships. These mathematical
relationships are made up of numbers and symbols.
Example
As an example, consider a business firm that sells a
product. The product costs $5 to produce and sells for
$20. A model that computes the total profit that will
accrue from the items sold is
• A variable is a symbol used to represent an item that
can take on any value.
• Parameters are known, constant values that are often
coefficients of variables in equations.
• Data are pieces of information from the problem
environment.
• A model is a functional relationship that includes
variables, parameters, and equations.
• Let us assume that the product is made from steel and
that the business firm has 100 pounds of steel available.
If it takes 4 pounds of steel to make each unit of the
product, we can develop an additional mathematical
relationship to represent steel usage:
• Let us assume that the product is made from steel and
that the business firm has 100 pounds of steel available.
If it takes 4 pounds of steel to make each unit of the
product, we can develop an additional mathematical
relationship to represent steel usage:
4 Model Solution
• Once models have been constructed in management
science, they are solved using the management science
techniques presented in this text. A management science
solution technique usually applies to a specific type of
model.
4 Model Solution
• A management science solution can be either a
recommended decision or information that helps a
manager make a decision
5 Implementation
• Implementation is the actual use of the model once it
has been developed or the solution to the problem the
model was developed to solve.
Batangas State University
ARASOF-Nasugbu Campus
The National Engineering University

Thank You
For Your Attention

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