Table Of Content

62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page i David R. Anderson University of Cincinnati Dennis J. Sweeney University of Cincinnati Thomas A. Williams Rochester Institute of Technology Jeffrey D. Camm University of Cincinnati James J. Cochran Louisianna Tech University Michael J. Fry University of Cincinnati Jeffrey W. Ohlmann University of Iowa Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page iv This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page ii Quantitative Methods for Business, © 2013, 2010South-Western, Cengage Learning Twelfth Edition ALL RIGHTS RESERVED. No part of this work covered by the copyright David R. Anderson, Dennis J. Sweeney, herein may be reproduced, transmitted, stored, or used in any form or Thomas A. Williams, Jeffrey D. Camm, by any means graphic, electronic, or mechanical, including but not James J. Cochran, Michael J. Fry, limited to photocopying, recording, scanning, digitizing, taping, web Jeffrey W. 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For your course and learning solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com Printed in the United States of America 1 2 3 4 5 6 7 15 14 13 12 11 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page iii To My Children Krista, Justin, Mark, and Colleen DRA To My Children Mark, Linda, Brad, Tim, Scott, and Lisa DJS To My Children Cathy, David, and Kristin TAW To My Family Karen, Jennifer, Stephanie, and Allison JDC To My Wife Teresa JJC To My Family Nicole and Ian MJF To My Family Amie and Willa JWO This page intentionally left blank 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page v Brief Contents Preface xvii About the Authors xxiv Chapter 1 Introduction 1 Chapter 2 Introduction to Probability 27 Chapter 3 Probability Distributions 62 Chapter 4 Decision Analysis 101 Chapter 5 Utility and Game Theory 157 Chapter 6 Time Series Analysis and Forecasting 188 Chapter 7 Introduction to Linear Programming 245 Chapter 8 Linear Programming: Sensitivity Analysis and Interpretation of Solution 304 Chapter 9 Linear Programming Applications in Marketing,Finance, and Operations Management 358 Chapter 10 Distribution and Network Models 419 Chapter 11 Integer Linear Programming 481 Chapter 12 Advanced Optimization Applications 530 Chapter 13 Project Scheduling: PERT/CPM 585 Chapter 14 Inventory Models 623 Chapter 15 Waiting Line Models 672 Chapter 16 Simulation 712 Chapter 17 Markov Processes 772 Appendix A Building Spreadsheet Models 798 Appendix B Binomial Probabilities 827 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page vi vi Brief Contents Appendix C Poisson Probabilities 834 Appendix D Areas for the Standard Normal Distribution 840 Appendix E Values of e(cid:2)λ 842 Appendix F References and Bibliography 843 Appendix G Self-Test Solutions and Answers to Even-Numbered Problems 845 Index 902 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page vii Contents Preface xvii About the Authors xxiv Chapter 1 Introduction 1 1.1 Problem Solving and Decision Making 3 1.2 Quantitative Analysis and Decision Making 5 1.3 Quantitative Analysis 7 Model Development 7 Data Preparation 10 Model Solution 11 Report Generation 13 A Note Regarding Implementation 13 1.4 Models of Cost, Revenue, and Profit 14 Cost and Volume Models 14 Revenue and Volume Models 15 Profit and Volume Models 15 Breakeven Analysis 16 1.5 Quantitative Methods in Practice 17 Methods Used Most Frequently 17 Summary 19 Glossary 19 Problems 20 Case Problem Scheduling a Golf League 23 Appendix 1.1 Using Excel for Breakeven Analysis 23 Chapter 2 Introduction to Probability 27 2.1 Experiments and the Sample Space 29 2.2 Assigning Probabilities to Experimental Outcomes 31 Classical Method 31 Relative Frequency Method 32 Subjective Method 32 2.3 Events and Their Probabilities 33 2.4 Some Basic Relationships of Probability 34 Complement of an Event 34 Addition Law 35 Conditional Probability 38 Multiplication Law 42 2.5 Bayes’ Theorem 43 The Tabular Approach 46 2.6 Simpson’s Paradox 47 Summary 50 Glossary 50 62345_00_fm_pi-xxvi.qxd 12/28/11 11:02 AM Page viii viii Contents Problems 51 Case Problem Hamilton County Judges 59 Case Problem College Softball Recruiting 61 Chapter 3 Probability Distributions 62 3.1 Random Variables 64 3.2 Discrete Random Variables 65 Probability Distribution of a Discrete Random Variable 65 Expected Value 67 Variance 68 3.3 Binomial Probability Distribution 69 Nastke Clothing Store Problem 70 Expected Value and Variance for the Binomial Distribution 73 3.4 Poisson Probability Distribution 73 An Example Involving Time Intervals 74 An Example Involving Length or Distance Intervals 74 3.5 Continuous Random Variables 76 Applying the Uniform Distribution 76 Area as a Measure of Probability 77 3.6 Normal Probability Distribution 79 Standard Normal Distribution 80 Computing Probabilities for Any Normal Distribution 84 Grear Tire Company Problem 85 3.7 Exponential Probability Distribution 87 Computing Probabilities for the Exponential Distribution 87 Relationship Between the Poisson and Exponential Distributions 89 Summary 89 Glossary 90 Problems 91 Case Problem Specialty Toys 97 Appendix 3.1 Computing Discrete Probabilities with Excel 98 Appendix 3.2 Computing Probabilities for Continuous Distributions with Excel 99 Chapter 4 Decision Analysis 101 4.1 Problem Formulation 103 Influence Diagrams 104 Payoff Tables 104 Decision Trees 105 4.2 Decision Making Without Probabilities 106 Optimistic Approach 106 Conservative Approach 107 Minimax Regret Approach 107 4.3 Decision Making With Probabilities 109 Expected Value of Perfect Information 112 4.4 Risk Analysis and Sensitivity Analysis 113 Risk Analysis 113 Sensitivity Analysis 114