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Introduction to Managerial
Decision Modeling
• Probabilistic Models
Where some input data values are uncertain
Quantitative vs. Qualitative Data
The modeling process begins with data
• Quantitative Data
Numerical factors such as costs and revenues
• Qualitative Data
Factors that effect the environment which are
difficult to quantify
Spreadsheets in Decision Making
• Computers are used to create and solve
models
Percent of
Taxable Income Taxable Income
up to $14,600 10%
$14,601 to $59,400 15%
$59,401 to $119,950 25%
Example Model: Break-Even Analysis
Profit = 0, so
Revenue = Costs
• Conflicting viewpoints
• Beginning assumptions
• Solution outdated
Possible Problems in
Developing Decision Models
Developing a Model
• Fitting the textbook models
• Understanding the model
• Validity of data
Possible Problems in
Developing Decision Models
Developing a Solution
• Hard to understand mathematics
Implementation