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Exclusivesummery:
Inthisdigitaleraofbusinessworldapplicationofmathematicsbecomeveryessentialforthesurvival.Ithelps
to create comparative advantage among competitor. By applying mathematics in business, the owner of the
businessgethelpformakingthepresentandthefutureplanning.Sometimesithelpsthemtotakeinitiatives
againstfacingloss.Mathematicsapplicationsinbusinessalsohelptocalculatethefutureprofit/incomeeasily.
Usingformula/functionsofthemathematicsinbusiness,theycansavetheirtime,tocalculatedepreciation,
interestamount,breakevenpointandmanythings.
Firstly we describe a case of Mr. Islam who was very insolvent and not welleducated. But by his gaining
knowledgeandexperiencehestartedhisbusinessanddaybydayfacingmanyproblems.Ashedidnotknow
theapplicationsofmathematicsandcouldnotfindouttheproblemsanditssolution,hecalledusuptohelp
himasafinancialanalyst.
Inthenextsectionofthisreportwedescribetheanalysispartwhereweanalyzewhyhewasfacingproblems
andtrytoanalyzeandsolveit.Toanalyzetheproblems,hereweusethethreeconceptofmathematicsinthe
case.Theconceptsare:
ArithmeticProgression(AP)
Logarithm
BreakevenPoint(BEP)
Andbythiswehelpedhimtodothefutureplanningofhisbusinessheretheapplicationofthemathematicsin
hisbusinesshelpshimtotakeanykindofdecision.Healsogetstheoverallviewofthefutureyear.
Introduction:
This report is generated under the academic supervision of Associate Professor,Farzana
Lalarukh,DepartmentofFinance,UniversityofDhaka.ThisreportispreparedastherequirementofBusiness
Mathematicscourse.ThetopicisMathematicsApplicationsinaCaseStudy.
Objectives:
Themainobjectiveofthestudyistheevaluationoftheapplicationofthemathematicsinbusinesswiththe
helpofacasestudy.
Togetpracticalknowledgeofapplicationsofmathematic.
Tobroadenouroutlookregardingthemathematicaltermwehavelearntearlier.
Tohavetheideaofdifferencetermsandapplicationofmathematicsindifferentorganizations.
Tohavethepracticalknowledgeoftheoreticalknowledgeofapplicationofmathematics.

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Scope:
Herewehadanopportunitytoworklikethefinancialanalyst.Thiscasehasgivenusanoverallviewhowone
will face problem when he / she is uneducated or not well educated about the application of mathematics in
business.
Methodology:
The methodology of the report is inductive. The report is based on mathematical terms and applications in
business.AndweuseLogarithm,ArithmeticalProgression(AP)andBreakevenPointinourreport.
Limitations:
Inspiteofhavingthewholeheartedeffort,thereweresomelimitations,whichactedasabarriertoconductthe
programandfordoinganempiricalresearchwork.Thelimitationistocreatethecase,analysisofcaseandto
applythemathematicswhichisaquietcriticalwork.

Mr.Islamisabookshopowner.HeisrunningthebookshopIslamiaBookHouseinNilkhet.But15yearago
hisfinancialconditionwasnotlikethatisnow.
Hewasnothighlyeducated.Hestudieduptoclass10.Hisfamilywasnotsosolvent.Sohewantedtosupport
hisfamilyfinancially.InsearchofbetterincomeandlifehecametoDhakain1997.Hetookajobofsalesman
inafamousbookcompanyAnnyaPrakashofBanglaBazaratalowsalary.Heworkedtherefor3years.He
learntthetermandnormsofthebookshopbusiness.
In2000,hisfatherdiedandhefellinadeeptrouble.Hefellintoafinancialcrisis.Atthattimeoneofhisfriends
suggested him to start a business with his gained knowledge on a book shop business. So he made up his
mindtoformhisownbusiness.
Tocollecthisfund,hecamebacktohisvillageandsoldalmostofhisproperties.HegotalmostTk.300000
from that and managed some from his friends. Coming back to Dhaka he rented a space in Nilkhet Book
Market for Tk. 8000 per month. Then he arranged all other necessary equipments to start the book shop
business.Hiscapitalconsistsof100000cash,100000worthyfurnitureandequipmentsand100000opening
inventory.Hebegantodealwithbookandstationary.
Bydintofhisgainedknowledgeandexperiencehewasrunninghisbusinesssucessfullytill2005.Evenhehad
aprofitbonanzaintheyearof2004.Inmidtimeheaddedmanythingsinhisbusiness.Hekeptasalesman
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forthesellingpurpose.Expandtheprofitamount.
Butafterprofitbonanzaof2004therateofprofitgraduallydecreased.Eventhe1st4monthof2006financial
yearhewentthroughaloss.Tofindthereasonofthisloss,hecomparedhisbusinessandaccountswithhis
other neighboring book shop. He found problems. He has no perfect future investment scopes analysis and
planning.Helacksknowledgeabouthisbusinessssellingtargetsagainstthecostoftheproductstobesold.
Andthatiswhy,inthecompetitioninthemarketheisfailingtofulfillhistarget.In2007,hedecidedtoexpand
hisbusinessbyopeningaphotocopysectorinhisshopasasideincome.Forbuyingthisphotocopymachine
heloansTk120000fromafinancialinstitution.Afterstartingthephotocopysectionhemanagedtoovercome
thelossbutitwastoolittletosatisfyhim.
To consult about his business situation he called up us and took the responsibility to analyze his financial
situationandfindouttheproblemsandweaknessesofhisbusinessandthewaytosolvethem.
Therecentfinancialconditionofhisbusinessislikethat
CashTk3,00,000
FurnitureandequipmentsTk1,00,000
BeginningInventoryTk50,00,000
RentoftheshopTk5,000
SalaryofthesalesmanTk3,000

Herewehaveestimatedtherecentyears(2010)andthenextyears(2011)targetprofitafterthesuccessof
theanalysis.
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ThedescribedcaseofMr.Islam,abookshopowner,wecametolearnthat,heisfacingproblemonfuture
planning and judging the profitability of the business operation. To solve the problem, he mainly needs
mathematicalapplicationinhisjobandfinancialanalysis.
As, we know he is not welleducated, he does not know mathematical application in judging profitability of
business.Helacksknowledgeabouthisbusinessssellingtargetsagainstthecostoftheproductstobesold.
For this, he needs break even analysis. Using the analysis he will be acknowledged of the point of selling
wherethecostandrevenuewillbeequalandafterthatsale,anyadditionalsalewillmakeprofit.Thisanalysis
willhelphimtosetmorereliabletargetofsales.Hewillalsobeabletoextendfuturepurchaseandsale.
BeforebreakevenanalysisMr.Islamneedstocalculatehiscostofgoodsperfectly.Animportantpartofcost
and expenditure is the yearly depreciation of the furniture and the equipment used in the business. As Mr.
Islam lacks education he has little knowledge on use of mathematics in valuation of depreciation. To find
depreciated value easily and correctly, arithmetic progression (AP) is applied in the solution of the case. It
relivesabusinessmanfromjustassumingdepreciationwithoutproperknowledge.
The use of log in calculation eases the complicated tasks in business accounting. The presentation of
logarithmincalculatingcompoundinterestofloanrevealsitsutility.
ThesedescribedtermsarepresentedinthesolutionofthecaseofMr.Islamonapplicationofmathematicsin
business.
APPLICATIONOFARITHMATICPROGRESSIONINTHECASE
Mr.Islamhasboughtaphotocopiermachineforhisbusinessbytakingloanfromafinancecompany.Tofind
outthedepreciatedvalueandotherthingsweusedAPinthiscasestudy.
An Arithmetic Progression (AP) is a sequence whose term increase or decrease by a constant number calls
thecommondifference.AseriesinAPdoesbecomeanadditiveseriesinwhichthecommondifferencecanbe
foundbysubtractingeachtermfromtheprecedingone.
Inthiscase,thecostofthemachineis1,20,000.Themachinecanproduce12,00,000copies.Inthefirstyear
heprinted50000copieswhichcost(50000120000/1200000)orTk.5000.Andithasbeenfoundthatevery
year additional 10000 copies are printed which cost additional Tk. 1000. So, depreciation of photocopier is
increasingeveryyearbyTk.1000.
Tofindthedepreciatedamountfortheof2010assumethat,
a=5000
d=1000
n=(20102006)or4
Depreciationamountoffortheyearof2010
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=a+(n1)d
=5000+(41)1000
=8000
So,intheyearof2010thedepreciationvalueisTk.8000
Inthiswayhecanfinddepreciationoftheequipment.
Here,theservicelifeofthephotocopieriscalculatedinnumberofcopiesprintedeveryyear.Ifhewantsto
findtheservicelifeinyears,hecanusethesummationformulainthefollowingway:
Assumethat,S=120000[120000=thetotalcostofthephotocopier
S=n/2{2a+(n1)d}
=>120000=n/2{25000+(n1)1000}
=>240000=n(10000+1000n1000)
=>240000=n(1000n+9000)
=>1000n2+9000n240000=0
=>n2+9n240=0
=>n=11.63
Sotheservicelifeofthephotocopieris11.63years.
Advantage:
SomeadvantagesoftheArithmeticProgressionare:
Someonecaneasilydeterminethefutureamount.
WecaneasilygetanyfarfutureamountbycalculatingthenthtermoftheAPseries.
Bycalculatingnthtermwecanalsogethowmanyinstallmentweshouldpayinthepayablemoneyamount.
APPLICATIONOFLOGARITHM
INTHECASE
Mr. Islam bought a photocopier on July1, 2006 cost Tk.120000 by borrowing the amount from a financial
company.Herewehaveusedlogarithmforcalculatingtheinterest.
The logarithm of a number to a given base is the index or the power to which the base must be raised to
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producethenumber.
So, this loan will be paid after 5 years. Interest rate for this loan is 10% and interest will be compounded
quarterlybutinterestwillbepaidyearly.
InterestCalculationonDec31,2010
Here,
Principal,P=Tk.120000
InterestRate,i=10%=0.1
Years=3.5years
Numberoftimeinterestcompoundedwithinayear,m=4
A=P(1+i/m)mn
=)A=120000(1+.1/4)4*3.5
=)A=120000(1+0.025)14
=)A=120000(1.025)14
=)logA=log120000+14log1.025(takinglogarithmonbothsides)
=)logA=5.0792+0.1502
=)logA=5.2294
=)A=antilog5.2294
=)A=169590
SocompoundinterestonDecember31,2010=169590120000
=Tk.49590
Calculationoftotalpayment:
A=P(1+i/4)mn
=)A=120000(1+0.1/4)4*5
=)A=120000(1+0.025)20
=)A=120000(1.025)20

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=)logA=log120000+20log1.025(takinglogarithmonbothsides)
=)logA=5.0792+0.2145
=)logA=5.2937
=)A=antilog5.2937
=)A=196653
SoMr.IslamwillhavetopaytotalTk.196653
AndtotalinterestwillbepaidbyMr.Islam,=196653120000
=Tk.76653
Advantage:
Someadvantagesofthelogarithmare:
We can easily do the big digit mathematics by the use of logarithm rather we use other mathematical
applicationorwithoutanymathematicalapplication
Itsavesourvaluabletimebycalculatingeasily.
BREAKEVENANALYSIS
INTHECASE
Break Even Point is a way for a manager to make sure he or she is making a profit is to first analyze the
circumstancesnecessarytoBreakEven.BreakEvenmeansneithermakesaprofitnorsufferaloss.Thenthe
manager can develop a plan to do better than break even. Break Even simply means that revenues must
equalcosts.
Sosincethenatbreakevenmeansthat
Profit=RevenueCost
Revenue=Cost
Profit=0
Asourbookhouseisnotaproductionbasedbusinessweshouldconsiderbreakevenpointattheviewofa
companythatpurchasesproductandsellsthematapricethatispresumablyabovethecost.
Forexampleourbookhousecostabook150tkbutitretailpricewouldbe200tk.Therefore,theMarkupis50
tk.
Markup=RetailpriceCost
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From the managers view point the dollar amounts of markup on numerous individual items which will vary
widelyareveryusefulinplanningandcontrollingoperationswhatisusefulistheoverallmarkuppercentageon
allitems.Forcomparabilityindifferentitems,markupisviewedinoneofthetwoways,afunctionofthecostor
afunctionoftheretailprice.
Soincurrentexample
Markup=markup/cost
=50/150=.33=33%
Onotherhand,infinancialstatements,accountsusetheconceptofmargin,whichisthemarkuppercentage
onretailprice,inthisexample,
Margin=markup/retailprice
=50/200=.35=35%
InourbookhouseweusetheconceptofMargin.Hereouraveragecostofbooksis130andtheretailpriceis
200.
So,Margin=markup/retailprice=70/200=.35=35%
TofindouttheBreakevenPointweneedtheCostfunction,RevenuefunctionandtheProfitFunction.
LetSisthequantityoftheproduct.
SotheCostfunctionwouldbe:
C(S)=FC.+VC.
HereFC.isFixedCostandVC.isVariableCost.
TheRevenuefunctionwouldbe:
R(S)=P*S
HerePisthePriceorretailprice.
Weknowtheprofitisthedifferencebetweentherevenueantcosts,sotheProfitfunctionwouldbe:
P(S)=R(S)C(S)
Now,thefixedcostsofourbooksare
1.thedepreciatedvalueofthefurnitureandequipmentin2010(5000)
2.theyearlyfareoftheroomoftheshop(60000)
3.thedepreciatedvalueofthephotocopymachinein2010(8000)
4.Theyearlysalaryofthesalesman(36000)

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SothetotalFC.is=1,09,000
Letthequantityoftheproductis=S
Perunitsellingpriceis=1Tk
So,theRevenuefunction:
R(S)=1*S
Ourmarginis=35%
So,thecostofgoodssoldorthetotalcost=1.35=.65
Totalcostfunction:
C(S)=FC.+VC.
=109000+.65*S
SotheProfitFunction:
P(S)=R(S)C(S)
=S.65S109000
Inbreakevenpointprofitwillbe0.
.35S109000=0
.35S=109000
S=109000/.35
S=311430
SoS=3,11,430isthebreakevensalestakavolume.
Soheshouldselltk.311430togetbreakevenpoint.
Sotoearnprofitheneedstosalemorethantk.311430ofproducts.

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HerewemakeachartofBreakEvenPoint:
Advantage:
BreakEvenpointhelpstomeasurethemarginormarkupofthebusiness.
Wecaneasilycalculatethetargetprofit.
Wecantakeinitiativeagainstfacingloss.
Applications of mathematics in business give a new to calculating business factors easily. The mathematics
conceptshelpbusinessownertomakeshorttermandlongtermplanningandmakedecisions.Wecangetan
overallviewoffuturetimeinbusiness.Mathematicsfunctionsandformulassaveourtimeandmakeusmore
efficientandeffective.
By preparing this report about mathematics applications in a case study of Mr. Islam, we can broaden our
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outlookabouttheapplicationsofmathematics.
Weallwantexpressourgratitudetoourcourseteacherforallkindsofhelpandstaybesideinourproblems.It
becomeagreatteamworkandhelpsallofustogaintheknowledgeabouttheapplicationsofmathematicsin
business.
BusinessMathematics
ByD.C.SanchetiandV.K.Kapoor
MathematicswithApplicationinManagementandEconomics
ByEarlK.Bowen

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