Info3010, Week 1 notes
Info3010, Week 1 notes Info3010
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This 3 page Class Notes was uploaded by Rebecca Evans on Friday February 12, 2016. The Class Notes belongs to Info3010 at Tulane University taught by Srinivas Krishnamoorthy in Spring 2016. Since its upload, it has received 49 views. For similar materials see Business Modeling in Business at Tulane University.
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Date Created: 02/12/16
WEEK 1 NOTES **Note: All completed Excel spreadsheets are posted on Blackboard under the materials for each class 1.11 Class Notes Rosa Raisins Problem Rosa Raisins produces sugar coated raisins for cereal and candy companies. The management believes that the demand for raisins will be 700,000 lbs. at a base price of $2.15/lb. and that the demand will increase by 15,000 lbs. for each cent reduction in price. Sketch a conceptual model (graph) to portray the relationship between demand and price. Also, write down an equation to represent the relationship. Solving the Problem: 1. Slope = rise/run= change in demand/change in price= 15,000lbs/-1cent= -15,000 lbs/cent or -1,500,000 lbs/dollar 2. Equation a. Demand= intercept + (slope)(price) b. 700,000 = b + (-1,500,000)(2.15) 700,000 = b – 3,225,000 b= 3,925,000 c. Final Equation: demand = 3,925,000 – (1,500,000) (price) 3. Demand a. Fixed component of demand=can be predicted, modeled by equation above in part C b. Random component of demand=unpredictable c. Fixed + Random demand account for all demand 4. Conceptual Mode l a. Will be used a lot in this course b. Example-see graph 5. Model- a representation of the real world (visual, physical, etc) 6. Business situationconceptual modelspreadsheet modelinsights from modelmanagerial insights 7. Course Overview a. Deterministic Modeling b. Probabilistic Modeling c. Predictive Modeling 1.13 Class Notes Principles of Business Modeling 1. Modularization (ex. Spreadsheet for Brand’s boarding house) a. Benefit: looks good, easy to synthesize data 2. Parameterization a. Excel: use cell reference and not #s bc it is more flexible and easier to change numbers b. Parameter=cell reference Excel: how to use data table function (“data” tab “What-if Analysis””Data table” 3. Sensitivity a. Try different parameter values and see impact on output 1.15 Class Notes Problem: Cupid Airlines Cupid Airlines runs a daily flight from New Orleans to Houston. The flight has a capacity of 98 seats. On the average, the airline gets $160 in fare revenue from an individual passenger. Based on past data, the airline knows that passenger seat demand will be between 85 and 100, with each value being equally likely. The airline is examining a contract according to the terms of which 7 seats on the flight would be reserved for executives of NOLA Energy, an oil and gas company that has offices in New Orleans and Houston. The company is willing to pay $600 for the block of seats on a daily basis. Should Cupid Airlines take on the contract with NOLA Energy? Develop a model to help Cupid answer this question. (Note that while the airline is primarily concerned with seat revenue, it also tracks passenger load factor which is the capacity utilization of the plane.) Decision: Whether or not to use the contract? 1. Yes, use the contract a. 7 seats for the company and 91 available seats b. Suppose 95 passenger seat demandsell 91 individual seats 2. No, don’t use the contract a. 98 available seats b. Suppose 95 passenger seat demandsell 95 seats 3. Need to compare demand to available capacity to figure this out (spreadsheet) 4. Represent yes/no decision w/ binary variable a. Yes=1 b. No=0 5. Put decision near output on spreadsheet so you can see how output effects decision 6. “If statement” in excel a. Formula: =if(decision cell=1,total seat capacity cell-contract quantity cell, total seat capacity cell) b. Formula: =if(condition, then this result, result of not-condition) c. OR formula: total seat capacity – (binary decision*contract quantity) d. Ex. Number of seats sold at passenger fare=if(demand>capacity, then number of seats available, if not then number of seats demanded) 7. Sum formula a. =cell1+cell2 b. =sum(cell1, cell2) 8. Passenger load factor=capacity utilization of plane a. Total number of tickets/total seat capacity=percent of plane being used b. =(seats to individual passengers + binary*number of contract seats)/total seat capacity 9. Data table a. Link upper left square to total revenue (what you want in all the cells)
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