Examples of Numerical Analysis to Inform Business Decisions
In this section, we will explore various examples of numerical analysis to inform business decisions. These examples will focus on decisions relating to price, output, costs, performance, and quality. We will present the data in table form to facilitate understanding and interpretation.
Example 1: Price Analysis
| Let’s consider a scenario where a company wants to determine the optimal price for a new product. The table below shows the sales volume and revenue at different price points: Price | Sales Volume | Revenue |
| £10 | 100 | £1,000 |
| £15 | 80 | £1,200 |
| £20 | 60 | £1,200 |
| £25 | 40 | £1,000 |
From the data, we can observe that the highest revenue is generated at a price of £15, where the sales volume is 80 units. This analysis suggests that setting the price at £15 would maximize revenue.
Example 2: Output Analysis
| Now let’s consider a manufacturing company that wants to determine the optimal output level to minimize costs. The table below shows the average cost per unit at different output levels: Output Level | Total Cost | Number of Units Produced | Average Cost per Unit |
| 100 | £10,000 | 100 | £100 |
| 200 | £18,000 | 200 | £90 |
| 300 | £24,000 | 300 | £80 |
| 400 | £28,000 | 400 | £70 |
Based on the data, we can observe that the average cost per unit decreases as the output level increases. This suggests that increasing the output level would result in lower average costs. Therefore, the company should aim to produce at least 300 units to minimize costs.
Example 3: Cost Analysis
| In this example, let’s consider a company that wants to analyse its costs to identify areas for cost reduction. The table below shows the different cost categories and their respective amounts: Cost Category | Amount |
| Raw Materials | £50,000 |
| Labour | £30,000 |
| Overhead | £20,000 |
From the data, we can see that raw materials account for the highest cost, followed by labour and overhead. This analysis suggests that the company should focus on optimizing its raw material costs to achieve cost reduction.
Example 4: Performance Analysis
| Now let’s consider a scenario where a company wants to analyse the performance of its sales team. The table below shows the sales revenue generated by each salesperson: Salesperson | Sales Revenue |
| John | £10,000 |
| Sarah | £8,000 |
| Michael | £12,000 |
From the data, we can see that raw materials account for the highest cost, followed by labour and overhead. This analysis suggests that the company should focus on optimizing its raw material costs to achieve cost reduction.
Example 4: Performance Analysis
| Now let’s consider a scenario where a company wants to analyse the performance of its sales team. The table below shows the sales revenue generated by each salesperson: Salesperson | Sales Revenue |
| John | £10,000 |
| Sarah | £8,000 |
| Michael | £12,000 |
| C | 3 |
From the data, we can observe that Product B has the highest number of defective products, followed by Product A and C. This analysis suggests that the company should focus on improving the quality control process for Product B to reduce defects.
These examples demonstrate how numerical analysis can be used to inform various business decisions. By analysing and interpreting the data, businesses can make informed choices that drive their success and profitability.