In an attempt to understand how to build an influence chart, an example was provided from the book. This is my attempt at summarizing the pricing decision example. When you build an influence chart you should start with your expected outcome or end result to the given problem. In this example, Profit is the indicated outcome which is enclosed in a hexagon and is the first symbol on the chart. Next, we must determine what factors must be considered when calculating the desired outcome, Profit. For the purposes of this example, circles are drawn around the variables Total Revenue and Total Cost which have arrows pointing to Profit, thus indicating they determine the Profit result. We now have a simple three symbol diagram; however there are more determinants for the existing variables and we must add those. The next determinants are Fixed Cost and Variable Cost which have arrows pointing to the Total Cost variable, thus indicated Total Cost relies on the result of the two variables. Note that the Fixed Cost input parameter determinant is indicated by an upside down triangle. Now we must calculate the Variable Cost which will be reached by the result of the calculation of Unit Cost input parameter times the Quantity Sold variable. The ending diagram has 7 symbols with connecting arrows in the direction flow ending with our outcome and will assist the modeler with how the variables are related and what should be included in the actual model (Powell & Baker, 2009).
References:
Powell, S. G., & Baker, K. R. (2009). Management Science, The Art of Modeling with Spreadsheets. Hoboken, NJ: Elbe, Susan.
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