Last updated 2001 Jul 04

Quantitative Methods for Business

Syllabus

Overview | Grading and Assignments | Summary Schedule | Assignment Details

Overview

Topics | Text | Instructor

Top of Page

Topics

Accounting is the world's oldest quantitative method; indeed it is the subject of the oldest written records we can decipher. This course concentrates on some more recent additions to the toolbox of those who manage businesses and the other organizations of society. Our study includes techniques of problem solving and the methods and meaning of measurements. Outside readings will emphasize that technical capability must be matched with organizational skills.

Numbers

Enter your social security number on your pocket calculator. Press the square root key. What have you got? There is more to numbers than one, two, three.

Actuarial Science

brings together uncertain events, finance, and probability. It is the scientific underpinning of risk management.

Forecasting

studies the art and science of making educated guesses about the future. Quantitative forecasting guesses things we can measure, things like revenue, births, and air pollution.

Simulation

substitutes for the real thing. We concentrate on a technique called Monte Carlo simulation, which brings the computer equivalent of rolling the dice to a great variety of situations. Common applications are scheduling, process flow, and market reactions.

Inventory

The Just in Time management philosophy has given inventory a bad name. Inventory survives as a buffer between supply and demand. Japan still stockpiles rice.

Queuing Theory

addresses the challenge of balancing the cost of waiting against the cost of providing service. This would be a problem of engineering and budgeting, except that queuing theory explicitly includes random events.

Learning

can be measured without answering how we learn, as individuals and as organizations. That is a great help in budgeting.

Decision Theory

is not as pretentious as it sounds. Decision theory considers the interaction of people's decisions with the uncertain state of the world around them.

Measuring Time

Clocks and calendars seem to run business, but business has had a lot to do with calibrating time.

Cryptography,

in the form of passwords and secret codes, is as old as history. Today cryptography guards sensitive business data, electronic funds transfer, and personal privacy.

Linear Programming

is the premier technique for making tradeoffs when management decisions entail many courses of actions in an environment of many constraining forces. It requires agreement on a single measurable goal such as maximizing profit or minimizing cost.

Project Management

divides and conquers large projects. Key questions are "When should we be doing what?" and "What resources will we need when?"

The Hungarian Flood Algorithm

No dam broke. The problem is to find the maximal flow through a network of highways, pipelines, or electronic pathways. This algorithm also illustrates the difference between prototyping and production in quantitative methods.

Text

Eppen, Gould & Schmidt, "Introductory Management Science", Fourth Edition, 1993

Instructor

Dr. Warren, Department of Accounting
Office:338 Fine Arts Building
Hours: Wednesday 4: to 5:40
E-mail: hwarren@calstatela.edu
Telephone: (213) 343-2847

Students are welcome to telephone or drop by anytime. If I am out, you can leave a telephone message on the voice mail system., extension 1310.

Grading and Assignments

A variety of assignments contribute to your grade in this course. Forming and expressing yours ideas, organizing projects, and computational skill are all important. The table below shows the relative weights of assignments.
Class Participation 14%
Data Disks for Time Series 9%
Executive Summaries 6%
Exercises from the Text 11%
Final Exam 25%
Forecasting Project 8%
Midterm Exam 10%
Queuing Project 12%
Special Exercises 5%

Part of your preparation for the graded assignments is reading, both readings from the text and outside readings.

Top of Page

Summary Schedule

Class Activities Week by Week
Week Lecture Readings Turn In Discussion Exams
1 Numbers;
Actuarial Science		 web N;
web A		 careful use of numbers
2 Forecasting Chapter 18;
web F, article		 pension plan article on measurement
3 Simulation; Inventory Chapters 13 and 16 Chapter 18-12;
Data Disk
4 Queuing; Learning Chapter 17;
web Q, web L		 Chapter 13-19; Executive Summary article on inventory
5 Decision Theory; Measuring Time Chapter 14 Chapter 17-24; Forecasting Project article on queuing
6 web D Chapter 14-26
Data Disk		 Case: To Drill or Not to Drill Midterm Exam
7 Cryptography web C inventory;
Executive Summary		 article on simulation
8 Linear Programming Chapters 2, 3, 4, and 5 cryptography;
Data Disk		 article on decision theory
9 Linear Programming Chapter 8.1-8.10;
article		 Chapter 5-28 Case: Red Brand Canners
10 Project Management; Networks Chapters 15 and 9.6 Chapter 8-20 using LINDO;
Queuing Project		 Case: Cash Flow Matching
11 Final Exam

Top of Page

Assignment Details

Class Participation | Data Disks | Executive Summaries | Final Exam | Forecasting Project | Midterm Exam | Outside Readings | Queuing Project | Special Exercises

Top of Page

Class Participation

Discussion includes cases, articles, and exercises. The cases are in the text at the ends of certain chapters. The articles are from professional journals. Be ready to discuss the exercises you also hand in. See the Summary Schedule for an overview of when things happen.

Data Disks

for time series. Each class member will each be responsible for finding particular segments of three time series.

Values for the time series are available from a number of sources. The Cal State LA library has useful handouts entitled "Where to Find Statistics About Business," "Where to Find Statistics, A Guide to General Sources," and "Where to Find Statistics about People." For example, the first of these lists the "CPI Report," and tells you it is located on the second floor of the Palmer Wing (south wing). The Internet is also a source.

Discount rate at auction for the 13 week Treasury bill

Auctions are held each Monday, except postponed from holidays to Tuesday. For more information see Treasury Securities. Look at the gopher site maintained by the University of Michigan.
frequency weekly
start first auction in 1996
length 26 weeks

Live Births in the United States

frequency monthly
start 24 months before you were born
length 48 months

Deaths from drowning in the United States

frequency yearly
start 1935
length 60 years

Submit each of your time series on a DOS disk in the *.WK1 format used by early versions of Lotus 1-2-3 such as Version 2.3. Exel, Quattro Pro, and later versions of Lotus 1-2-3 can write and read files in this format. Use the "Save As" command.

Write your name and the name of the file on the outside of the disk. In the file itself write your name, the source of your information, and descriptive headings for dates and measurements. Use the general format

The data of the time series should be in two adjacent columns with captions

Date
Put the date of each measurement in column A. Order the dates with the earlier dates at the top of the list. The word "Date" should be in Cell A5. The first date should be in Cell A6. Use the spreadsheet date format based on date serial numbers. For the year 1995 use the day January 1, 1995, etc. For the month April, 1973 use the day April 1, 1973, etc.
Measurement
List all measurements in column B to the right of their respective dates. Use a format that aligns decimal points.

Executive Summaries

The executive summaries should be of articles about applications of quantitative methods to business and society.

Write the executive summaries in typed prose. The summaries should be between 230 and 330 words long. You may paraphrase, but do not quote passages verbatim.

The executive summaries should be of articles about applications of quantitative methods to business and society. Look first in the journal Interfaces. The journals Management Science, Decision Sciences and , Operations Research are more technical, but they contain many interesting articles. From time to time The Harvard Business Review, Management Accounting, and the general press also have good articles on applications of quantitative methods. Jurimetrics (Journal of Law, Science and Technology), published by the American Bar Association, has many thought provoking articles. Find applications that interest you.

The articles assigned in the class schedule are for discussion. Do not use these for written summaries, but note that they are articles of the type you should summarize. With your summary include your name, a full citation, and a copy of the article. I may retain the copy.

The business environment and this class demand writing with correct spelling, punctuation, and grammar. A computer can insure meeting these mechanical standards. You should do better than a machine. Write so that your readers want to read.

Exercises from the Text

are shown in the Summary Schedule. For example, Chapter 18-12 means work and turn in Problem 12 from Chapter 18.

Final Exam

From 7:30 to 10 pm; open book and open notes.

Forecasting Project

Part One

Working with preloaded series and the Forecast program.

    Run the program FOREC0.EXE. This program is accessible in the Advanced Technology Lab, Simpson Tower, E191 (The low building next to the tower). From Windows, use Scholar's Work Environment. Click on Workspace, then Coursework, then ACCT 503 (Warren), then FOREC0.EXE.

    You can also download the forecasting program and related data files to a computer that runs Windows. First create a directory on your disk to hold the files. Then use the Save As dialog box after you click on forecasting package, save save the file on the chosen disk.

    Expand then run the program.

    From the main menu bar of the Forecast Program click Series, then Financial, then hewlpk.tsf, then OK.

  1. Find the loss for each of the following forecast methods
  2. Find the loss under Level exponential smoothing with alpha = 0.2, 0.4, 0.6, 0.8, 1.0, and 1.2.
  3. From the main menu click on Analyze, Likelihood Map, Single Exponential. Interpret what you see.
  4. Pick another time series. Experiment with the program. Discuss what forecasting method works best.

Part Two

Choose a time series of interest to you, one with at least 60 values in the series. Put this series in a plain text file (also called an ASCII file). From a word processor such as Microsoft Word use " File / Save As" and select "Text only". On successive lines of the file write Give the series a name such as MYFILE.TSM and save it on the disk with the forecast program. When you start the program select your series under the Miscellaneous group. (The M in TSM is for Miscellaneous.)

Study the series with the Forecasting program. Do the following.

  1. Choose and describe the most appropriate of the loss functions.
  2. Study and describe several forecasting methods, and pick the best.
  3. Explain what auxiliary information would improve forecasts for your series.

Midterm Exam

From 8 to 10 pm; open book and open notes. Before the exam look at the review outline. After the midterm exam see the key for one set of possible answers to the problems.

Outside Readings

The readings outside the text consist of print articles and pages on the World Wide Web.

Print Articles. Copies of the print articles are at the limited loan desk in the library. The leading number in square brackets is the loan desk call number. Use this number when asking for the article.

The questions in italics are food for thought.

Web Pages. Entry points to web pages are shown in the Summary Schedule. For example, web A links to a page which introduces actuarial science and contains links to other pages. I wrote the pages ending with hwarren@calstatela.edu specifically for this course. Other pages come from the greater World Wide Web.

Readings from the Text

are shown in the Summary Schedule. For example, Chapter 18 means read all of Chapter 18. Chapter 9.6 means read Chapter 9 Section 6.

Queuing Project

Study a real world queuing situation. Measure the arrival and service distributions. Describe the queue discipline and the operating characteristics. How might the system be improved?

The queuing paper should be two to three typed pages plus any tables or graphs. Choose a real queuing system to observe. Common examples involving people are lines in stores, banks, restaurants, and theaters. Cars do the waiting in common situations like drive up windows and freeway on ramps.

Carefully define the arriving population and what constitutes an arrival. Define the server, which may actually be several people or machines working together. Define when service begins and ends.

Your observations should cover at least twenty arrivals and ninety minutes or at least forty arrivals over a shorter period. Make a trial run before collecting your final observations. A friend can be a great help in writing down the data.

Estimate the following operating characteristics directly from your observations:

Make at least one suggestion for how the performance of the system could be improved.

Special Exercises

Pension Plan

Submit a personal pension plan including

Use the tables FIA 1983 or MIA 1983 as appropriate.

Cryptography

Decipher the following message, which was enciphered with a two letter Caesar code. The cipher text is one continuous string of characters. For viewing convenience the long string has been broken by quotes. The quote symbols are not part of the cipher text. Spaces between quotes are part of the cipher text. 
	"JPFBCLRIRKF KHTMRMOXWVJMVH VRAZMRKLZIMEARXWZ WVHFZ"
	"RJWHUIGQKICQQMVHSVVHWEGME WLRWMMIH AJHL WNLTRT NWH"
	"KP  RYLMJA WEH  RZSQJMVHIMYBCIITPHTFRIUKFBEASVK RA"
	"ZMRQEAWZEICHIMMMEBWHJMIC KWHSVVHWCWVRKFVYZW JH"

You can feed segments of the message into the program CAESARCO.EXE to expedite your analysis.

Inventory

Find the best ROP and OQ for items in the Inventory Game for the default stock item. Develop a search strategy and describe your procedure.

Top of Page
Warren Home Page

copyright notice
Send comments to hwarren@calstatela.edu