MANAGEMENT

SCIENCE
INTRODUCTION
 OVERVIEW
As for today, we are going to talk about what the management science is, as well as the used
approach in order to solve management science problems.

MANAGEMENT
DEFINITION APPROACHES
EVOLUTION

BREAK-EVEN
SPREADSHEET
ANALYSIS
RELATIONSHIP BETWEEN

MANAGEMENT,
SCIENCE AND ART

SCIENCE
Systematic body of knowledge.
Formed on basis of basis of
observation and experimentation
Scientific principles are valid and
applicable universally
MANAGEMENT
AS SCIENCE
A systematized body of knowledge
– own theories, concepts and even
principles.
Inexact science – evolved over a
period based on repeated
experimentation and observation
in different types of organizations.
Principles are modified according
to a given situation.
MANAGEMENT
AS AN ART

Takes care of the management process

within an organization with help of
knowledge gained from study and
ART
practice of theoretical concepts.
Existence of theoretical concepts
There exist a plethora of management
strategies and theories profound by Personalized application
fathers of management and used by Based on practice and creativity
manager to handle various situations.
Each manager has their style of
management.
 MANAGEMENT
SCIENCE
The application of a scientific approach to solving management
problems in order to help managers make better decisions.

Recognized and established discipline in business industry.

Also known as Operations Research, Quantitative method,

Quantitative Analysis, and Decision Sciences.
EVOLUTION
OF MANAGEMENT
 PRE-HISTORIC ERA
"stone age"

PALEOLITHIC MESOLITHIC
Period of climatic instability.
Starts with the appearance of first hominids
and ends with discovery of agriculture.

Traces of management: when they hunt NEOLITHIC

animals, gone for fishing and by gathering Humans invented agriculture and
fruits, nuts, and other wild plant. livestock raising.
Rapid changes in the organization
of manufacturing industry that
transformed countries from rural
agricultural to urban industrial PROBLEMS
economies. ENCOUNTERED
Massive change in the way people Deplorable working conditions and child
labor.
lived and worked.
Unsanitary living conditions and pollution.
Food shortages
INDUSTRIAL
REVOLUTION
 Father of Scientific Management and
published the “Principles of Scientific FREDERICK
Management." WINSLOW
TAYLOR
Increase production by the productivity
of the individual.

Frank Gilbert integrated the “motion

SCIENTIFIC study” into scientific management study.
FRANK

MANAGEMENT Lillian Gilbert then performed early

AND
LILLIAN
THEORY micro-motion studies.
GILBERT

The simplification of jobs.

Apply principles of the scientific
method to the practice of Developed series of charts that have
HENRY L.
management. become important tools in management GANTT
practice.
CLASSICAL
ORGANIZATION
THEORY MAIN PILLARS/ELEMENTS

Deals with the anatomy of formal

Division of labor
organizations and also views one as a Departmentalization
machine and the employees as parts of Coordination
the machine. Scalar and functional processes
Structure
Span of control
HENRI FAYOL

Developed the 14 principles of management.

1. Division of work
2. Authority and responsibility MAX WEBBER
3. Discipline
Believed in the objective form of
4. Unity of command
organization called BUREACRACY.
5. Unity of direction
6. Subordination of individual interest to
general interest CHESTER BARNARD
7. Remuneration of personnel
President of New Jersey Bell
8. Centralization
Telephone Company who introduced
9. Scalar chain
the idea of the informal organization.
10. Order
11. Equity
12. Stability of tenure of personnel
13. Initiative
14. Espirit de corps
 ACCEPTANCE THEORY
OF AUTHORITY
This states that a manager's authority rests on workers'
acceptance of his right to give orders and to expect compliance.
HUMAN RELATIONS
APPROACH

Focused on interpersonal relationships. HUMAN RELATION

Lays emphasis on individual needs and
behavior. APPROACH/
Conflict in organization is taken as
negatively and efforts are made to BEHAVIORAL
avoid it.
THEORY
BEHAVIORAL THEORY Addresses the human dimension of work.

Focused on group relations A better understanding of human behavior at

Emphasizes group behavior work, such as motivation, conflict, expectations,
Conflict is considered to be part of and group dynamics, improved productivity.
modern organization and it may have a
positive also
 Self-
ELTON MAYO actualization
achieving one's
full potential
Human relations and the social needs of
workers are crucial aspects of business
Esteem Needs
management. prestige, feelingof accomplishment

Belongingness & Love Needs

intimate relationships. friends

ABRAHAM
MASLOW Safety Needs
security, safety

Developed one of the most widely

recognized need theories. Physiological Needs
food, water, warmth, rest

Maslow's Hierarchy of Needs Theory

DOUGLAS MCGREGOR
Believed that two (2) basic kinds of
managers exist:
Theory X manager
Theory Y manager

FREDERICK HERTZBERG

Introduced the two-factor theory -

Hygiene Factor and Motivation Factor.
HYGIENE: extrinsic conditions or
environmental factors
MOTIVATION: positive influences
QUANTITATIVE
APPROACH
It applies numeric methods
such as formulas, statistics,
and scheduling models to This is also known as mathematical or quantitative
management problems and approach. It primarily visualizes management as a
uses the results to monitor logical entity, the action of which can be expressed
and improve management in terms of mathematical symbols, relationships, and
decisions. measurement data.

MANAGEMENT
SCIENCE APPROACH
This is commonly viewed as the
foundation of organizational
development, views the organization as
an open system made up of interrelated
and inter-dependent parts that interact
as sub-systems. Thus, the organization
comprises a unified singular system
made up of these subsystems.
SYSTEM
APPROACHES
CONTINGENCY
APPROACH
An organizational approach that
postulates that there is not a single
optimum approach to leading a team,
running a business, or making
decisions. The best course of action
depends on the current internal and
external circumstances.
 TOTAL QUALITY
MANAGEMENT
A management framework based on the belief that an organization
can build long-term success by having all its members - from low-
level workers to its highest-ranking executives - focus on improving
quality and, thus, delivering customer satisfaction.
 MANAGEMENT
SCIENCE APPROACH
PROBLEM SOLVING
 Observation

Problem
Definition

Model
Construction
Management
Feedback Science
Techniques
Solution

Information

Implementation
OBSERVATION
The system must be continuously and
MANAGEMENT SCIENTIST
closely observed so that problems can be
identified as soon as they occur. A person skilled in techniques of
management science and trained to
The person who normally identifies a
identify problems.
problem is the manager because managers
work in places where problems might Hired specifically to solve problems
occur. using management science
techniques.
The problem must be clearly and concisely defined.
Limits of the problem and the degree to which it
pervades other units of the organization must be
included in the problem definition. DEFINITION
Because the existence of a problem implies that the
OF THE
objectives of the firm are not being met in some way, PROBLEM
the goals (or objectives) of the organization must also
be clearly defined. A stated objective helps to focus
attention on what the problem is.
 MODEL

Abstract representation
MODEL of an existing problem
CONSTRUCTION situation.
Form or graph or chart
and mathematical
relationship.
ILLUSTRATION
Asta Company sells a product. The
product cost is P5.00 and selling
price is P20.00.
Model: Z = P20x – P5x
Where:
X = number of units of the product
Z = represents the total profit that results from the sale of the product.

PARAMETER

VARIABLES Constant values that are generally

Symbol used to represent an item that
can take on any value.
Z is a dependent variable and its value
depends on the number units sold.
X is a independent variable and the
number of units sold is not depended
on anything.
coefficients of the variables in an equation.
DATA
Pieces of information from a problem environment.
Selling price ofP20 and P5.
FUNCTIONAL RELATIONSHIP
Model that includes variables, parameter and
equations
ADDITIONAL INFORMATION A new mathematical relationship is develop:
The product is made from steel and that the 4x = 100 lb of steel
business firm has 100 pounds of steel available.
Now our model consists of two (2) relationships:
It takes 4 pounds of steel to make each unit of the Z = P20x – P5x
product. 4x = 100 lb of steel

OBJECTIVE FUNCTION
In order to signify this distinction between
A means to maximize (or minimize)
the two relationships in this model, we will
something. This something is a
add the following notations:
numeric value.

maximize Z = P20x – P5x

CONSTRAINT subject to
The restrictions or limitations 4x = 100 lb of steel
on the decision variables
 MODEL SOLUTION
The actual solving of the problem.

Using the model in the previous slide:

maximize Z = P20x – P5x
subject to
4x = 100 lb of steel

Use simple Algebra. Solve for x.

Thus, if the manager decides to
4x = 100
produce 25 units of the product
X = 100/4
and all 25 units sell, the business
X = 25 units
firm will receive P375 in profit.
Substitute the value of x.
Z = P20x – P5x
= P20(25) – P5(25)
= P375
 IMPLEMENTATION
The actual use of model once it is developed or the solution to the
problem the model was developed to solve.
 David decided to put up a business, to be called
"David's Rice" – a rice retailing business in his
hometown. He canvassed from local farmers
and suppliers, and got a very affordable bargain
of P 1,800 per sack of 50-kilogram rice. Apart
from the cost of purchase, David has to
LET'S TRY THIS! shoulder the freight of P 5 per sack to deliver
the purchase into his store. David is, however,
frustrated in calculating how much should be
the price per sack and per kilo given that he
wants to earn a net of P 1,100 per sack. He also
wants to make a simulation of any possible
scenario.
BREAK-EVEN
ANALYSIS
MODEL BUILDING
 BREAK-EVEN ANALYSIS
This is also called the Profit Analysis.

Management science models can be solved

mathematically, graphically and computer.

To determine the number of units of a product

PURPOSE to sell of produce that will equate the total
revenue to total cost.
 Level of sales or production by a
company. Expressed as the number of
units produced, and sold or as a dollar VOLUME
volume of sales or a percentage of total
capacity available.

Generally independent of the volume of

COMPONENTS units produced and sold. That is, fixed
OF BREAK-EVEN costs remain constant, regardless of how
FIXED
COST
ANALYSIS many units of product are produced
within a given range.

Determined on a per-unit basis. Thus,

VARIABLE
total variable costs depend on the COST
number of units produced.
 ILLUSTRATION
TOTAL VARIABLE COSTS
Levi Clothing Company, which produces
A function of the volume and the variable cost per denim jeans, occurs the following monthly
unit. This relationship can be expressed sales:
mathematically as: Fixed cost = P10,000 and Variable cost = P8
Total Variable Cost = Vx per pair and arbitrarily the sales was equals
to 400 pairs of denim jeans.
Where:
BRANDING
V = variable cost per unit TC = F + Vx
x = volume (number of units) sold = P10,000 + (8)(P400)
= P13,200
TOTAL COST
PROFIT
An operation is computed by summing total fixed
The ifference between total revenue and
cost and total variable cost, as follows:
total cost.
Total Cost = Total Fixed Cost + Total Variable Cost
Total Revenue = SPx
or TC = F + Vx
Where:
Where: F = fixed cost
SP = Selling Price
X = Units sSold
For our Levi Company, the denim jeans sell for
P23 per pair and we sell sell 400 pairs per month, BREAK-EVEN POINT
then the total monthly revenue is:
Total revenue equals total cost, thus,
Total Revenue = SPx the profit is zero.
= P23(400)
= P9,200 Let profit be Zero.
Z = SPx – F - Vx
The whole problem can now be computed as
0 =BRANDING
23x – 10,000 – 8x
follows:
15x = 10,000
Total Profit = Total Revenue – Total Cost X = 666.7 pairs of jeans
Z = SPx – (F + Vx)
Z = SPx – F - Vx Or derived the formula for easy
computation:
Can now be solved as: Break-even Point = F / SP – V
Z = SPx – F - Vx = 10,000 / 23 – 8
Z = 9,200 + 13,200 = 666.7 pairs of jeans
Z = (P4,000)
 BREAK-EVEN POINT

50

40
REVENUE, COST AND PROFIT

30

20

10

0
200 400 600 800 1000 1200 1400 1600

VOLUME

Total Revenue Fixed Cost Total Cost

SENSITIVITY
ANALYSIS
SENSITIVITY
To see how sensitive a management model is to changes.
ANALYSIS

ILLUSTRATION

Using the previous given and using the formula for break-even point.
An increase in Selling price from P23 to P30.

BP = F / CM*
*CM = Contribution margin = Selling price – Variable Cost

BP = F / CM
= 10,000 / (30-8)
= 10,000 / 22
= 454.5 pairs
 BREAK-EVEN POINT

REVENUE, COST AND PROFIT 20

10

200 400 600 800

VOLUME

Total Revenue Fixed Cost Total Cost New Total Revenue

An increase in Variable cost/expenses to
offset the potential loss of sales due to
increase in price.
From Variable cost of P8 increased by P4.
An increase in fixed cost /
expenses.
From Fixed cost of P10,000
increased to P13,000.

BP = F / CM BP = F / CM
BP = 10,000 / (30-12) BP = 13,000 / (30-12)
= 10,000 / 18 = 13,000 / 18
= 555.5 pairs of jeans = 722.2 pairs of jeans
 Break-even Formula

Fixed Cost P10,000.00

Variable Cost
EXCEL P8.00

SPREADSHEET Selling Price P23.00

Break-even Point P666.67

GROUP 5
Atillano, Sean Christian.
Caldito, Kriezl.
Calustre, Baby Lyka.
Redonario, Nicole.
Vicedo, Trisha Marie.