BAHRIA UNIVERSITY (Karachi Campus)

Department of Business Studies

QUIZ-3 (Statistics & Mathematics for Management), Spring – 2023

Name:______________________ Class/Section: MBA-1A (Weekend)

Registration or Enrollment No.: _______________ Sunday, May 21, 2023

Note: 1) Students are required to mention all necessary mathematical steps in their solution.
2) Students may be used calculator or computer software(s) such as Excel and scientific Calculator for computing.
Q.1 A company sells a product for $150 per unit. Raw material costs are $40 per unit, labor costs are $55 per unit, shipping costs
are $15 per unit, and annual fixed costs are $200,000. [06 Marks]
[15 Minutes]
Required:
a) Determine the profit function P=f(x), where ‘x’ equals the number of units sold.
b) How many units must be sold in order to earn an annual profit of $750,000?
c) Determine the number of units of the product which must be sold in order to break even.

Q.2 A lump sum of money is invested at a rate of 12.3% per year compounded monthly. How long will it take the investment to
triple? [04 marks]
[10 minutes]
Solution:
Q.1 Price = p = $150 per unit
Variable cost = v 40 + 55 + 15 = $110
Fixed Cost = FC = $200,000

a) Profit function P(x) = ?

R(x) = px
C(x) = vx + FC = 110x + 200,000
P(x) = R(x) – C(x)
P(x) = 150x – 110x – 200,000
P(x) = 40x – 200,000

b) P(x) = 40x – 200,000

750,000 = 40x – 200,000
750,000 + 200,000 = 40x
X = 23,450 units are required to sale to earn $750,000 profit.
𝐹𝐶
c) 𝑥𝐵𝐸 = 𝑝−𝑣
200,000
𝑥𝐵𝐸 = 150−110
= 5,000 𝑢𝑛𝑖𝑡𝑠 should be produce and sold to reach break-even quantity.
Q.2 Let P = x
S = 3x
i = 12.3% compounded Quarterly

𝑖 12𝑛
𝑆 = 𝑃(1 + )
12
0.123
⟹ 3x = x (1+ 12 )12n
⟹ 3 = (1.01025) 12n
⟹ ln (3) = ln (1.01025) 12n
⟹ ln (3) = 12n ln(1.01025)
ln(3)
⟹ 12𝑛 = = 107.7300592
ln(1.01025)

⟹ n = 8.977504935 ≅ 𝟗 years
 BAHRIA UNIVERSITY (Karachi Campus)
Department of Business Studies
QUIZ-3 (Statistics & Mathematics for Management), Spring – 2023

Name:______________________ Class/Section: MBA-1A (Weekend)

Registration or Enrollment No.: _______________ Sunday, May 21, 2023

Note: 1) Students are required to mention all necessary mathematical steps in their solution.
2) Students may be used calculator or computer software(s) such as Excel and scientific Calculator for computing.
Q.1 A car leasing agency purchases new cars each year for use in the agency. The cars cost $15,000 new. They are used for 3-years,
after which they are sold for $3,600. The owner of the agency estimates that the variable cost of operating the cars, exclusive of
gasoline, are $0.18 per mile. Cars are leased at a flat rate of $0.35 per mile (gasoline not included). [08 Marks]
[15 Minutes]
Required:
a) What is the break-even mileage for the 3-year period?
b) What are total revenue, total cost, and total profit for 3-year period if a car is leased for 50,000 miles?
c) What price per mile must be charged in order to break-even if a car is leased for 50,000 miles over a period of 3 years?
d) What price per mile must be charged in order to earn a profit $5,000 per car over its 3-year lifetime if it is leased for a total
of 50,000 miles?

Q.2 The board of regents of a southern state is planning the future college-level needs for the state. They have observed that the
number of students attending state – operated schools – junior colleges, 4–year schools, and the state university – has bee
increase at the rate of 9.2% per year. There are currently 90,000 students enrolled in the various schools. Assuming continued
growth at the same rate, how long will it take for enrollments to reach 250,000 students? [04 marks]
[10 minutes]
Solution:
Q.1 Given Data
Cost = C(x) = $15,000
Resale Value = $3,600
Fixed Cost = 15,000 – 3,600 = $11,400
Variable Cost = V = $0.18 per mile
Flat Rate = p = $0.35 per mile (gasoline not included)

𝐹𝐶 11,400
a) 𝑥𝐵𝐸 = 𝑝−𝑣
= 0.35−0.18
11,400
𝑥𝐵𝐸 = 0.17
= 67,058.82353
𝑥𝐵𝐸 = 67,058 𝑜𝑟 67,059 𝑚𝑖𝑙𝑒𝑠

b) Total Revenue = R(x=50,000) = px = 0.35x50,000

Total Revenue at 50,000 mile are $17,500

Total Cost = C(x=50,000) = Vx + FC

Total Cost = C(x = 50,000) = 0.18(50,000) + 11,400
Total Cost = C(x=50,000) = $20,400
 Total Profit = P(x = 50,000) = R(x = 50,000) – C(x=50,000)
P(x = 50,000) = $17,500 – $20,400 = (2,900) Loss

c) Price at break-even if car leased at x = 50,000 miles = p = ?

We know that for break-Even case Profit should be zero
R(x) = C(x)
px = vx + F.C
p(50,000) = 0.18(50,000) + 11,400 = 20,400
20,400
p = 50,000 = $0.408
Hence price $0,408 will be required to meet breakeven analysis at 50,000 miles leased.

d) Given Profit = P(x) = $5,000

Price = p = ?
R(x) = C(x) + P(x)
px = vx+FC + 5,000
p(50,000) = 0.18(50,000) + 11,400 + 5,000
p(50,000) = 25,400
25,400
p = 50,000 = $0.508
Hence price $0.508 will be charged to earn profit $5,000 at 50,000 miles leased.

Q.2 No. of year = n = ?

Increasing rate = i = 9.2% per year compounded annually
Current enrollments = P = 90,000 students
Expected Future enrollments = S = 250,000 students

We have
𝑆 = 𝑃(1 + 𝑖)𝑛
⟹ 250,000 = 90,0000 (1+0.092)n
⟹ 2.7778 = (1.092) n
⟹ ln (2.7778) = ln (1.092) n
⟹ ln (2.7778) = n ln(1.092)
⟹ 1.021659248 = n (0.08801087732)
1.021659248
⟹ 𝑛=
0.08801087732

⟹ n = 11.60833614 ≅ 𝟏𝟐 years
 BAHRIA UNIVERSITY (Karachi Campus)
Department of Business Studies
QUIZ-3 (Statistics & Mathematics for Management), Spring – 2023

Name:______________________ Class/Section: MBA-1A (Weekend)

Registration or Enrollment No.: _______________ Sunday, May 21, 2023

Note: 1) Students are required to mention all necessary mathematical steps in their solution.
2) Students may be used calculator or computer software(s) such as Excel and scientific Calculator for computing.
Q.1 A local civic arena is negotiating a contract with a touring ice-skating show, Icey Blades. Icey Bladrs charges a flat fee of $60,000
per night plus 40 percent of the gate receipts. The civic arena plans to charge one price for all seats, $12.50 per ticket.
[06 Marks]
[15 Minutes]
Required:
a) Determine the number of tickets which must be sold each night in order to break even.
b) If the civic arena has a goal of clearing $15,000 each night, how many tickets must be sold?
c) What would nightly profit equal if average attendance is 7,500 per night?

Q.2 The nominal interest rate on an investment is 15.5% per year. Determine the effective interest annual interest rate, if
Effective Interest Rate (r)
Compounded Semi-Annually
Compounded Quartly
Monthly
Weekly
[03 Marks]
[13 Minutes]
Required:
i) Represent the graphical representation for above computed numerical values.
ii) Interpret above computed values.
Solution:
Q.1 Fixed Cost = F.C = $60,000
p = Ticket price $12.50 per ticket.
v = Variable Cost = 40% of 12.50 = $5.00
𝐹𝐶 60,000
a) 𝑥𝐵𝐸 = 𝑝−𝑣 = 12.50−5
60,000
𝑥𝐵𝐸 = = 8,000 𝑡𝑖𝑐𝑘𝑒𝑡𝑠
7.5

b) Profit = P(x) = $15,000

Cost = C(x) =Vx + FC
C(x) = 5x + 60,000
R(x) = px = 12.5x
Now
R(x) = C(x) + P(x)
12.5x = 5x + 60,000 + 15,000
(12.5 – 5)x = 75,000
7.5x = 75,000
x = 10,000 tickets must be sold to earn desire profit $15,000
 c) P(x = 7,500) = ?
P(x) = R(x) – C(x)
P(x= 7,500) = R(x) - C(x)
P(x= 7,500) = p.x - vx – FC
P(x= 7,500) = (p - v)x - FC
P(x= 7,500) = (12.5 - 5)(7,500) – 60,000
P(x= 7,500) = $(3,750) Loss

Q.2 The nominal interest rate on an investment is 15.5% per year. Determine the effective interest annual interest rate, if
Effective Interest Rate (r)
Compounded Semi-Annually 16.00625%
Compounded Quartly 16.42444%
Monthly 16.64996%
Weekly 16.73888%
Conclude above computed values.
𝑖
𝑟 = [(1 + )𝑚 − 1] x 100
𝑚
𝑖 = 15.5% = 0.155
0.155
𝑟 = [(1 + 2 )2 − 1] x 100 = 16.00625%
Conclusion:
Graphical Represention of Effective Interest Rate with several compounded period at 15.5% Nominal Interest Rate
16.74%
16.80% 16.65%
Effective Interes Rate

16.60% 16.42%
16.40%
16.20% 16.01%
16.00%
15.80%
15.60%
Compounded Semi-
Compounded Quartly Monthly Weekly
Annually
Series1 16.01% 16.42% 16.65% 16.74%
Several Compounded Period

Graph of computed Effective Interest Rate Representation help us to conclude that Effective Interest Rate is increasing from Compounded Semi-Annual
to weekly compounded period.