Quantitative Methods for Business FIFTH EDITION Donald Waters Financial Times Prentice Hall is an imprint of Harlow, England London New York Boston San Francisco Toronto Sydney Tokyo Singapore Hong Kong Seoul Taipei New Delhi Cape Town Madrid Mexico City Amsterdam Munich Paris Milan
IJ i NHHk. Preface xvii Part One - Background 1 1 Managers and numbers 3 Chapter outline 3 Why use numbers? 3 Solving problems 7 Useful software 12 Chapter review 15 Case study - Hamerson and Partners 15 Problems 16 Research projects 16 Sources of information 17 2 Calculations and equations 19 Chapter outline 19 Working with numbers 20 Changing numbers to letters 27 Solving equations 29 Simultaneous equations 32 Powers and roots 36 Chapter review 45 Case study - The Crown and Anchor 46 Problems 46 Research projects 47 Sources of information 49 3 Drawing graphs 50 Chapter outline 50 Graphs on Cartesian coordinates 50 Quadratic equations 58 Drawing other graphs 62 Graphs of simultaneous equations 66 Chapter review 70 Case study - McFarlane & Sons. 71 Problems 72 Research projects 73 Sources of information 73
X Contents Part Two - Collecting and summarising data 75 4 Collecting data 77 Chapter outline 77 Data and information 77 Types of data 82 Using samples to collect data 85 Organising data collection 92 Chapter review 99 Case study - Natural Wholemeal Biscuits 100 Problems 101 Research projects 102 Sources of information 102 5 Diagrams for presenting data 103 Chapter outline 103 Data reduction and presentation 103 Tables of numerical data 106 Diagrams of data 111 Continuous data 124 Chapter review 129 Case study - High Acclaim Trading 130 Problems 131 Research projects 133 Sources of information 133 6 Using numbers to describe data 134 Chapter outline 134 Measuring data 134 Measures of location 136 Measures of spread 146 Other measures of data 155 Chapter review 159 Case study - Consumer Advice Office 159 Problems 160 Research projects 161 Sources of information, 162 7 Describing changes with index numbers 163 Chapter outline 163 Measuring change 163 Changing the base period 169 Indices for more than one variable 171 Chapter review 177 Case study - Heinz Muller Engineering 178 Problems 178 Research projects 180 Sources of information 181
Contents XI Part Three - Solving management problems 183 8 Finance and performance 185 Chapter outline 185 Measures of performance 185 Break-even point 190 Value of money over time 197 Discounting to present value o 201 Mortgages, annuities and sinking funds 208 Chapter review 211 Case study - OnlineInkCartridges.com 212 Problems 213 Research projects 214 Sources of information * 215 9 Regression and curve fitting 216 Chapter outline 216 Measuring relationships 216 Linear relationships 221 Measuring the strength of a relationship 228 Multiple regression 235 Curve fitting 240 Chapter review 244 Case study - Western General Hospital 245 Problems 246 Research projects 247 Sources of information 248 10 Forecasting 249 Chapter outline 249 Forecasting in organisations 249 Judgemental forecasts 252 Projective forecasts 255 Forecasts with seasonality and trend 269 Chapter review 279 Case study - Workload planning 279 Problems 280 Research projects 281 Sources of information 281 11 Linear programming 283 Chapter outline 283 Constrained optimisation 283 Formulation 284 Using graphs to solve linear programmes 290 Sensitivity of solutions to changes 296 Solving real problems 299 Chapter review 305 Case study - Elemental Electronics 305
XII Contents Problems 306 Research projects 309 Sources of information 309 Part Four - Introducing statistics 311 12 Uncertainty and probabilities 313 Chapter outline ^ 313 Measuring uncertainty 313 Calculations with probabilities 317 Conditional probabilities 323 Chapter review 331 Case study - The Gamblers' Press 332 Problems 333 Research projects 334 Sources of information 335 13 Probability distributions 336 Chapter outline 336 Frequency distributions 336 Combinations and permutations, 338 Binomial distribution 341 Poisson distribution 347 Normal distribution 353 Chapter review 366 Case study - Machined components 366 Problems 367 Research projects 368 Sources of information 369 14 Using samples 370 Chapter outline 370 Purpose of sampling 370 Sampling distribution of the mean 372 Confidence intervals 377 One-sided confidence intervals 382 Using small samples 385 Chapter review 388 Case study - Kings Fruit Farm 388 Problems 389 Research projects 390 Sources of information 391 15 Testing hypotheses 392 Chapter outline 392 Aim of hypothesis testing 392 Significance levels 396 Tests with small samples 401 Testing other hypotheses 402
Contents XIII Chi-squared test for goodness of fit 407 Tests of association 412 Chapter review 415 Case study - Willingham Consumer Protection Department 416 Problems 416 Research projects 418 Sources of informations 418 Part Five - Management problems involving uncertainty 421 16 Making decisions 423 Chapter outline 423 Giving structure to decisions 424 Decision making with certainty 426 Decision making with strict uncertainty 427 Decision making with risk 432 Sequential decisions 439 Chapter review 446 Case study - The Newisham Reservoir 447 Problems 447 Research projects 450 Sources of information 451 17 Quality management 452 Chapter outline 452 Measuring quality 452 Quality control. 459 Tools for quality control 461 Acceptance sampling 465 Process control 470 Chapter review 473 Case study - Bremen Engineering 474 Problems 476 Research projects 477 Sources of information 478 18 Inventory management 479 Chapter outline 479 Background to stock control 480 The economic order quantity 484 Stock control for production 489 Variable demand. 491 Periodic review 494 ABC analysis of stock 498 Chapter review 500 Case study - Templar Manufacturing 501 Problems 501 Research projects 502 Sources of information 503
XIV Contents 19 Project management 504 Chapter outline 504 Project planning 505 Network analysis 506 Timing of projects 511 Project evaluation and review technique 521 Chapter review 526 Case study - Westin Contractors 527 Problems 528 Research projects 529 Sources of information 530 20 Queues and simulation 531 Chapter outline 531 Features of queues 531 Single-server queues 533 Simulation models 540 Monte Carlo simulation 544 Chapter review. 551 Case study - The Palmer Centre for Alternative Therapy 551 Problems. 552 Research projects 553 Sources of information 554 Glossary 555 Appendix A 567 Solutions to review questions Appendix B 581 Probabilities for the binomial distribution Appendix C 586 Probabilities for the Poisson distribution Appendix D 590 Probabilities for the Normal distribution Appendix E 591 Probabilities for the ^-distribution Appendix F 592 Critical values for the x 2 distribution Index 594