Application of Mathematical Models in Different

Business Domains

Quantitative Techniques- I

Submitted to: Submitted by:

Dr.Avinash K Shrivastava Abishek Kumar Giri

Aashutosh

Aswath.C

Muskan Agarwal

V.Navaneethakrishnan
Introduction:
The Business environment is always surrounded with challenges and hurdles which need to
be taken care of to run a business smooth and profitable. These problems take place on a
daily basis which can be solved by mathematical models.

Mathematics is an important subject concept in managing a business. Mathematics helps in

decisions making process of a business. Mathematics applications help one to arrive at a
accurate figures as a results to a business questions. Mathematics models are used in
accounting, inventory management, marketing, sales forecast and financial analysis of a
business.

A Real World Case:

This study is based on a real world operating firm named “KADAMBA TADERS”. The
company deals with organic cosmetic products such as face pack powders, face cleansing gel
and etc.

Scope Of Study:
 Finding the breakeven point of sales, breakeven analysis by using linear function
equation as the mathematical tool. (Marketing domain : Finding the optimal
production rate to arrive at the sales target for profit making )
 Find the cost incurred as electricity charges using linear function equation and
graph (operations domain: Finding the functional relationship between the units
produced and
 Finding the cost of finance by using Simple Interest and Compound Interest
concepts. (Economics domain: Finding the cost of finance)
 Find the depreciation of machinery and finding the salvage value using Arithmetic
Progression. (Finance domain: Finding the depreciation)
 Finding the man power efficiency by using algebraic expression (Human resource
domain).
 Finding the trend in existing sales and forecast the sales by using regression model.
(Marketing domain)
Company Profile :
Company name: KADAMBA TRADERS.

Address: Madurai, Tamilnadu.

Ownership: proprietorship.

Type of business: Manufacturing.

Industry: cosmetics.

Category: MSME.

PRODUCT: Organic face pack powder.

Assets:

DESCRIPTION AMOUNT

LAND AND BULIDING 500000

MACHINERY 75000

EQUIPMENT 35000

INVENTORY 120000

TOTAL 730000

Financing Methods:

DESCRIPTION AMOUNT

OWN 280000

BANK LOAN 200000

LOAN FROM FAMILY 250000

TOTAL 730000

Notes:
 BANK LOAN @11% COMPOUND INETREST
 LOAN FROM FAMILY @5 %
Deprecation:
 Kadamba traders depreciated it’s machinery at 12% per annum.
 Kadamba traders depreciates equipment monthly starting from 12% and (n2=n1-1%,n2-
1%) respectivlyfor the following months.

Sales For The Period (April 2021-September 2021):

MONTH SALES (UNITS) AMOUNT

APRIL/2021 461 69150

MAY/2021 511 76650

JUNE 480 72000

JULY 620 93000

AUGUST 711 106650

SEPT 867 130050

TOTAL 3650 547500

Notes:
 VARIABLE COST: 30
 SELLING PRICE: 150

USAGE OF ELECTRICITY:

MONTH (UNITS)

APRIL/2021 13

MAY/2021 16

JUNE 14

JULY 19

AUGUST 21

SEPT 28

 For first 10 units its Rs. 600(fixed minimum).

 For every additional unit Rs.20. is charged.
Break even interpretation
From the case given that

Fixed cost = 730000

Variable cost = 30 per unit

Selling price = 150 per unit

Let’s take the number of quantity of the Oragnic face packs made and sold as “q”. then
since face pack sold at Rs. 150, the revenue function is

R (q) = 150q

Then since the variable cost per unit is 30, T, the variable cost of making q unit units will
be 30q. the fixed cost of 730000,

then cost function becomes

C(q)= 30q+730000

The profit function is

P(q) = R(q)-C(q)

= 150q- (30q+730000)

= 120q- 730000

The coefficient 120 of q represents the profit per unit and is precisely the difference
between the selling price per unit of 150 and the variable cost per unit of 30.

Similarly, the constant term of -730000 indicates that the manufacturer must produce and
sell enough units of face back to compensate for the fixed cost of 730000 before breaking
even.

We know that 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.

 P(q) = 0

120q- 730000 = 0

q = 730000/120units

q= 6,083.3 units

so, the break- even take volume of sales (revenue) is

R (6,083.3) = 150 x 6083.3

= 9,12, 495

Linear Functions
Sometimes an equation will consist of more than one section or piece, each of

which is linear.

For example,

x; x≤0

y= 2x; x>0

Series 1
5
4
3
2
1
0 Series 1
-5 -4 -3 -2 -1 0 1 2 3 4 5
-1
-2
-3
-4
-5
describes a function composed of two linear pieces, the first being x for all

values of x≤0, and the second being 2x for all values of x>0. Such a function is

a piecewise linear function and its’ graph is shown in

The charge for the first 10 units consists of the 600-customer charge plus the 60 charge
per unit. Letting u represent the number of units used, this charge becomes

60u+600…………………………. (1)

Now if Kadamba face pack uses more than 10 units, the charge from (1) for the first 10

units will be

= 60(10) +600

= 1200

To this must be added the charge of 20 for each unit over 10, resulting in

a charge of

1200+20(u-10)

= 1200+20u-200

= 20u+1000

Putting (1) and (2) together, we get the cost function

C(u) = 60u+600 0≤u≤10

C(u) = 20u+1000 u> 10

Cost of April 2021, when 13 (>10) units of ELECTRICITY were used,

C(u) = 60u+660

= 60(13) +660

= 780+ 660

= 1440

Cost of May 2021, when 16 (>10) units of ELECTRICITY were used,

C(u) = 60u+720
 = 60(16) +720

= 960+ 720

= 1680

Cost of June 2021, when 14 (>10) units of ELECTRICITY were used,

C(u) = 60u+680

= 60(14) +680

= 840+ 680

= 1520

Cost of July 2021, when 19 (>10) units of ELECTRICITY were used,

C(u) = 60u+780

= 60(19) +780

= 1140+ 780

= 1920

Cost of August 2021, when 21 (>10) units of ELECTRICITY were used,

C(u) = 60u+820

= 60(21) +820

= 1260+ 820

= 2080

Cost of September 2021, when 28(>10) units of ELECTRICITY were used,

C(u) = 60u+960

= 60(28) +960

= 1680+ 960

= 2640

Now we can plot these point in a graph to under better,

 Charges
4000

3500

3000

2500
Axis Title

2000

1500

1000

500

0
13 14 16 19 21 28
units produced 461 511 480 620 711 867
charge 1440 1520 1680 1920 2080 2640

Inferences: we could clearly see that the curves of unit produced and electricity charges
rise respectively with each other.
Simple interest
In the case of kadamba traders stated that the owner has taken a loan of from family of RS
250000@5% in the month of April 2121

HERE

Amount of loan(P)=250000

Interest rate(i)=5% or 0.05

Time passed(n)=6 months

=6/12

So the amount with interest to be paid if the loan is returned at the end of september2121

A=P(1+in)

=250000(1+0.05*0.50)

=250000(1.025)

=256,250

Interest of last six months (April 2121-September2121)

=A-P

=256,250-250000

=6,250

And Interest of each months= Interest ÷Time passed

=6250÷6

=1,041
COMPOUND INTEREST
In the case of kadamba traders stated that the owner has taken a loan of from bank also at
the same time of RS 200000@11% in the month of April 2121

Amount of loan(P)=200000

Interest Rate(i)=11% or 0.11

For the month of April 2121

P=200000

i=0.11

n=1/11

=0.09

Net amount ,A = P (1+0.12)n

For the month of April 2021

P=200000

n = %₁₁

20.09.

Net amount A = P((+0:11) h = 1000000P ( 14011) 10.09. 200000 (1.0094). = 201887-32

Interest

201887.32 -200000= 1887-32

For the month May 2011.

P = 201887-32 2 = 0.11 n = Y/₁1 20.09 t A = 201887 32 (140.11) 0:00 = 203, 785 06. 6

Net amount

Interest: 203,785-06 - 2000.00= 3,7 85,06

For the month June 2011

P= 203, 785-06

i = 0·11

n = 0.09.
A = 2001 203,785.06 - (1+0.11 009=3500 205, 700.63.

Net Amount

interest - 205,700.63 - 200000

=25,700.63.

For the Month of July 2021.

P = 205,700.63

n = 0.09.

I= 0.11

Net Amount = 205, 750.63 (1+0.11)0ro a 207, 634.21

=) 205, 700 63 (1.0094)

interest = 207, 634.21 - 200000.

For the month of of August 2011.

P =207, 634.021.

n = 0.09

I= 0.11

Net Amount = 207, 634.21 (1+0-11) 0:09. 2 209,585.97

Interest = 209,585.97 - 200000.= 9,585.97

For the month of September 2011.

P=209,585, 97

i= 0.11

h -0.09

Net Amount = 209,585,97 (1+0.11) 0-09 2211,556.07

Interest = 211, 556.07. 11,556.07. - 200000

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.

Salvage Value

Salvage value is the estimated resale value of an asset at the end of its useful life. It is
subtracted from the cost of a fixed asset to determine the amount of the asset cost that will
be depreciated. Thus, salvage value is used as a component of the depreciation
calculation.

Salvage Value Formula:

S=C(1-d) n

Now,

Cost of Machinery (C) = 75,000

Depreciation rate=12% or 0.12

Depreciation Period= 6 months

=6/12 = 0.50

Savage value of machinery of Kadamba Traders after 6 months will be:

S=C(1-d)n

=75000(1-0.12)0.50

=75000(0.88)0.50

=70,356.23

=70,356

The salvage value of machinery would be 70,356 if Kadamba Traders sold it now (after
being used for 6 months).
Arithmetic Progression (AP)

An arithmetic progression (AP) is a sequence where the differences between every two
consecutive terms are the same. In an arithmetic progression, there is a possibility to
derive a formula for the nth term.

Arithmetic Progression in Kadamba Traders

Let take the cost of equipment used by Kabamba Traders 100 cr.

Now the percentage of depreciation in the end of the month of April, May ,June and so on
would be 12,11,10,….

Using AP,

a=12

d=11-12 =-1

n=6

Now, the percentage of the depreciation in September 2021,

a+(n-1) d

=12+(6-1) (-1)

=12+5(-1)

=12-5

=7

So, the A.P series of depreciation of equipment for six months would be

12+11+10+…+7

Total value depreciated in six months

n/2 (a+I)

=6/2 (12+7)

=3×19

=57

Hence, the total value of equipment in September 2021

100-57 = 43
 Now the total cost being 35000, the value of Kadamba Traders’ equipment at the end of
September 2021

(35000÷100) ×43 =15050

Algebraic expression

In the case of Kadamba traders worker A alone can finish producing 250
units in 12 days and worker B alone can do it in 15 days. If both of them
work at it together, how much time will they take to finish it?
Solution:

Time taken by to finish the work = 12 days.

Work done by rani in 1 day = ¹/₁₂

Time taken by viji to finish the work = 15 days.

Work done by viji in 1 day = ¹/₁₅

Work done by (rani + viji) in 1 day = ¹/₁₂ + ¹/₁₅ = ⁹/₆₀ = ³/₂₀

Time taken by (rani + viji) to finish the work = 206206 days, i.e., 6²/₃ days.

Hence both can finish the work in 6²/₃ days.

Regression Model:
Finding the trend in existing sales and forecast the sales by using regression model.

MONTH SALES (UNITS) AMOUNT

APRIL/2021 461 69150

MAY/2021 511 76650
JUNE 480 72000
JULY 620 93000
AUGUST 711 106650
SEPT 867 130050
TOTAL 3650 547500

Results:

Month sales
October 2021 141639
November 2021 154319
Conclusion

Arithmetic, an antiquated strategy for computation, can be utilized by

anyone in tackling various sorts of issues. As innovation is growing
exceptionally quick various utilization's of arithmetic currently should be
possible effectively inside an exceptionally short time utilizing present-day
computing gadgets. While the normal math takes a more drawn-out time
than the advanced gadgets take. Although we can do our essential
estimations utilizing current working out gadgets, we should attempt to
know and utilize the run of the mill numerical terms to improve our
numerical information.
Work done:

Abishek Kumar Giri-20%

Aashutosh-20%

Aswath.C-20%

Muskan Aagarwala-20%

V.navaneethakrishnan-20%