Report on –

Application of Business Mathematics in Real World

Submitted to –
Najifa Teesha

Submitted by –
Jannatul Tajin Tonima
ID – 20200100000127
BUS 121.1 – Fall 2020
Section – A/1

Date – January 31st, 2021

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 Graphical Image

Executive Summary

Mathematicians, economists, statisticians and others have applied their skills to manage problems for many
years. The first concerted and dramatically successful effort in their areas occurred during World War II when
specialists were formed into operations analysis groups to assist in planning military operations. These analysts
used mathematics and statistics extensively in their studies, and their resulting recommendations were an
important contribution to the war effort. Following the war, analysts, soon joined by others, turned their
attention and their new techniques to attacking problems of manage mental operations. They accomplished
major improvement in inventory control, quality control, warehouse location, industrial operations, agriculture,
purchasing decisions, scheduling complex tasks and a variety of others.

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 Table of Content
Number Name Page
1 Real World Case 4-5
2 Break Even 5-6
3 Interest Calculation 6-11
4 Conclusion 11
5 Reference 11
6
7

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Real World “CASE”
In real world business math is very much affiliated with real world. Here I tried to add a brief description of a
food factory and information supplied by its’ owner and workers are given below-
  1      Name of the factory: Baker’s
  2      Address: 10/B Vagalpur Lane, Hazaribag, Dhaka-1209
  3      Owner: Saiful Mirza
  4      Date of establishment: January 21st
Fixed Cost

Description  Amount (Tk.)

Land 50000

Machinery 40000

Equipment 20000

Vehicle 24000

Building 14000

Gas line  5200

Others 1300

Total 154500

 Variable Cost per unit 5 Taka

 Selling Price 15 Taka/Unit
Financial Source:

Description Amount (Tk.)

Own 54500

Loan from relatives 40000

Bank loan 60000

Total 154500

Unit Sold

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 Name of the month Units

November 2009 16000

December 2009 17500

January 2010 18000

February 2010 20000

March 2010 22000

April 2010 25000

Total 118500

Last Six Months GAS Usage

Name of the month Cu.Feet Units

November 2009 1600 16

December 2009 1700 17

January 2010 1800 18

February 2010 2000 20

March 2010 2200 22

April 2010 2500 25

Total 11800 118

 Depreciation of machinery: Bakers depreciates its’ machinery in value 10% applied to the original
Depreciation of equipment: Bakers depreciates its’ equipment in value, 15% in November 2009, 12.5%   in
December 2009, 10% in January 2010 and so on; all percentages applying to the original cost.

Break Even
From the case e came to know that,
                Fixed cost= Tk.154500
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                Variable cost= Tk. 5 per unit
                Selling price= Tk. 15 per unit
We denote the number (quantity) of breads made and sold by q. Then since items are sold at Tk.15 per unit, the
revenue function is
                                                R (q) = 15q
Now since the variable cost per unit is Tk.5, the variable cost of making q units will be 5q. Adding the fixed
cost of Tk. 154500, the cost function becomes
                                                C (q) = 5q+154500
Lastly, since profit is revenue minus cost, the profit function is
                                                      P (q) = R (q) – C (q)
                                                                 = 15q – (5q + 154500)
                                                                 = 10q -154500
Notice that the coefficient 10 of q represents the profit per unit and is precisely the difference between the
selling price per unit of Tk.15 and the variable cost per unit of Tk. 5. Similarly, the constant term of
-154500 indicate that the manufacturer has to produce and sell enough units of breads to compensate for the
fixed cost of Tk.154500 before breaking even.
One way for the owner of a business to make sure he/she is making a profit is to first analyze the circumstances
necessary to break even (i.e. neither make a profit nor suffer a loss). Then the owner can develop a plan to do
better than break-even (i.e. make a profit). Now to break-even simply means the revenues must equal costs, so
since
                                                                Profit = Revenue – Cost
Then at break-even
Revenue = Cost
Means that
                                                                Profit = 0
 So, at break-even profit will be 0. Thus
                                                                     P (q) = 0
                                                                → 10q – 154500 = 0
                                                                → q = 154500÷10 units
                                                                → q = 15450 units
Finally, the break-even taka volume of sales (revenue) is
                                                                R (15450) = 15×15450
                                                                                    = Tk. 231750
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Interest Calculation
In the case of Bakers stated earlier the owner has taken a loan of Tk. 40000 @ 10% in the month of November
2009 from his relatives.
Here
Amount of loan (P) = 40000
Interest rate (i) = 10% or 0.10
Time passed (n) = 6 months
                                =6/12
                                =0.50
So, the amount with interest to be paid if the loan is returned at the end of April 2010.
                                           A = P (1+in)
                                                =40000 (1+0.10×0.50)
                                                =40000 (1.05)
                                                =42000
Interest of last six months (Nov.’09-April ’10)
                                                   A-P
                                                = 42000-40000
                                                =2000
and interest of each month
                                                Interest ÷Time passed
                                                = 2000÷6
                                                            =333.33
Compound interest
In the case of bakers stated earlier the owner has also taken a loan of Tk. 60000 @ 12% at the same time from
the bank.
Here
                         Amount of loan (P) = 60000
                         Interest rate (i) = 12% or 0.12
 For the month of November 2009
                                           P = 60000
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                                                i= 0.12
                                                n = 1/12 or 0.08
                Net amount, A = P (1+0.12)n
                         
                  =60000(1+0.12)0.08
                                               =60546
  Interest =60546-60000
                                    =546
For the month of December 2009
                                P = 60546
                                i = 0.12
                                n= 0.08
                Net amount, A = 60546 (1+0.12)0.08
                                               = 61097
                Interest = 61097-60546
                          = 551
For the month of January 2010
                P= 61097
             i=0.12
             n=0.08
             Net amount, A= 61097(1+0.12)0.08
                                           =61653
             Interest =61653-61097
                           =556
 For the month of February 2010
             P=61653
             i= 0.12
             n=0.08
            Net amount, A = 61653(1+0.12)0.08
                                           =62215
            Interest = 62215-61653

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                          =562
 For the month of March 2010
            P=62215
            i=0.12
            n=0.08
            Net amount, A =62215(1+0.12)0.08
                                           =62782
            Interest =62782-62215
               =567
For the month of April 2010
            P=62782
            i=0.12
            n=0.08
            Net amount, A=62782(1+0.12)0.08
                                              =63354
           Interest = 63354-62782
                         =572
Salvage value
 Bakers uses machinery for its’ production. The machinery has a
                                     Cost (C) = 40000
                                     Depreciation rate (d) = 10% or 0.10
                                     Depreciation period (n) = 6 months
                                                                                    = 6/12 or 0.50
 So, after six months the salvage value of the machinery used by Bakers will be
                                                S = C (1-d)n
                                                =40000 (1-0.10)0.50
                                                =40000 (0.90)0.50
                                                =37947.33
                                                =37947
So, if the machinery of bakers is sold right now (i.e. after being used for six months) the salvage value of the
machinery would be Tk. 37947.
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Arithmetic progression
An arithmetic progression is a sequence whose terms increase or decrease by a constant number called the
common difference. A series in arithmetic progression thus becomes an additive series in which the common
difference can be found by subtracting each term from its’ preceding one.
Thus if the first term and the common difference are known, the A.P. is completely known.
                The arithmetic progression
                                                                a, (a+d), (a+2d), (a+3d),…………………
whose first term is a the common difference is d, is designated as the standard form of an arithmetic
progression.
                The corresponding arithmetic series
                                                                a+(a+d)+(a+2d)+(a+3d)+…………………….
is designated as the standard form of an arithmetic series.
A.P. in bakers
Suppose the cost of the equipment used by Bakers is Tk. 100. Now the percentages of depreciation at the end of
November 2009, December 2009, January 2010 and so on are respectively 15, 12.5, 10,…………. which are
arithmetic progression with
                                                                a = 15
                                                                d = 12.5-15 = -2.5
                                                                n = 6
Hence, percentages of depreciation in April 2010,
                                                                a+ (n-1)d
                                                                = 15+(6-1)(-2.5)
                                                                = 15+5(-2.5)
                                                                = 15-12.5
                                                                = 2.5
So, the A.P. series of depreciation of equipment for six months
                                                15+12.5+10+…………+2.5
Also, total value of equipment depreciated in six months
                                                   n/2 (a+l)
                                                = 6/2 (15+2.5)
                                                = 3 × 17.5
                                                = 52.5
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Hence, the value of equipment of bakers at the end of April 2010
                                                   100-52.5
                                                = 47.5
Now the total cost being Tk. 20000, the value of Bakers’ equipment at the end of April 2010
                                                   (Tk. 20000÷100)×47.5
                                                = Tk. 9500

Conclusion
Mathematics, an ancient method of calculation, can be used by any one in solving different types of problems.
As technology is developing very fast different applications of mathematics now can be done easily within a
very short time using modern calculating devices. Whereas, the typical mathematics takes a longer time than the
modern devices take. Although we can do our necessary calculations using modern calculating devices, we
should try to know and use the typical mathematical terms to enrich our mathematical knowledge.
Reference
1. https://www.assignmentpoint.com/business/business-mathematic/applications-of-mathematics-in-
business.html

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