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9/7/2015

KMS 1013
Business Mathematics
Unit 1: Introduction to Business
Mathematics
1.1 Why Business Mathematics?
1.2 Life Cycle of Doing Business
1.3 Costing Principles in Business
1.4 Direct and Indirect Cost
1.5 HR Related Costs
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1.1 What is Business Mathematics?


(University of Mannheim)

Business mathematics seeks to solve economic problems by

means of methods and concepts provided in the sphere of


mathematical science.
It is clear to everyone that bankers crunch numbers on a
daily basis. However, one also comes upon mathematics
everywhere where the future developments and trends are
to be determined.
Business mathematics is all about how the problems from
the realm of business and technology can be translated
into the language of mathematics and then be solved by
means of mathematical models. Quite often this involves
more than one mathematical model - what makes the
matter even more exciting!
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1.1 What is Business Mathematics?


Summary mathematics that is used by commercial

enterprises to record daily transactions, forecast operating


cost, projection of sales volume & profit (at various level),
possible amount of interest payout and how to optimize
human capital cost.
Business mathematics is important to most of the sectors

and industries in Malaysia.


Exercise 1 listed down 5 possible activities in day-to-day

transaction that related to business mathematics.


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1.2 Life Cycle of Doing Business

1.2 Life Cycle of Doing Business

How are you going to start


business in Malaysia?
Can a HRD graduate be an
entrepreneur?
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1.3 Costing Principles in Business


The cost principle (or historical cost principle) is
one of the basic underlying guidelines in accounting.
The cost principle requires that the assets to be
recorded at the cash amount (or its equivalent)
when the asset is acquired.
Example: Land purchased for RM1 million is
appraised at the much higher value because the
housing market has booming but the value of the
lain still remain RM1 million except .
http://www.businessdictionary.com/definition/cost-principle.html
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1.3 Costing Principles in Business


The cost principle also means that valuable brand names

and logos that were developed through effective


advertising will not be reported as assets on the balance
sheet (not being included in the company's asset
amounts).
Brand name that is acquired through a transaction with
another company will be reported on the balance sheet at
its cost.
If a company has an asset that has a ready market with
quoted prices, the historical cost may be replaced with the
current market value on each balance sheet.
Source: http://www.accountingcoach.com

1.3 Costing Principles in Business


Example is an investment consisting of shares of

common stock that are actively traded on a major stock


exchange.
The historical cost principle is a trade off between
reliability and usefulness. The historical cost of an asset
is completely reliable. After all, that's how much the
company paid for the asset. It might not be very useful
however.
Liabilities are also accounted for using the historical
cost principle. When bonds or other debts are issued or
received, they are recorded on the balance sheet at the
original acquisition price.
Source: http://www.myaccountingcourse.com/

Snap Short Exercise.


A trading company was formed in 1990. It purchased a shop

lot for RM2million. This business is still operating until


today. The current market value for this shop lot is about
RM3.2 million. How much is the price of the shop lot is the
balance sheet?
Johnny bought a piece of equipment in 2000 for

RM100,000. Today this equipment only worth RM20,000.


Johnny would still report the equipment at its purchase
price of RM________________, less depreciation, even
though its current fair market value is only
RM_________________.
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1.4 Direct and Indirect Cost


What are the Direct and Indirect Cost to
Start Up the Business in Malaysia?

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1.4 Direct and Indirect Cost


Business costs may be categorized as direct and

indirect costs on the basis of whether they can be


attributed to the production of specific goods, services,
departments or not.
Direct costs can be defined as costs which can be
accurately traced to a cost object with little effort.
Cost object may be a product, a department, a project,
etc. Direct costs typically benefit a single cost object
therefore the classification of any cost either as direct
or indirect is done by taking the cost object into
perspective.
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1.4 Direct and Indirect Cost


A particular cost may be direct cost for one cost object but

indirect cost for another cost object. Direct costs generally


include:
Wages & Fringe benefits
Consultant services
Travelling
Transportation
Materials, supplies and equipment purchased/ leased/
rent directly for use
Utilities
Building
Etc.
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1.4 Direct and Indirect Cost


Indirect cost cannot be accurately attributed to specific

cost objects.
Sometime it is also known as common cost.
These typically benefit multiple cost objects and it is

impracticable to accurately trace them to individual


products, activities or departments etc.
Some of the example includes:
Cost of depreciation
Insurance
Salaries
Etc.
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1.5 HR Related Cost


Myth busting in HR on Business
Mathematics I choose HR because l do
not like math's?

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