Business Analytics: Mathematical Model, Costing and Revenue Behaviour, Advertising Impact on Sales

This report covers mathematical model, costing and revenue behaviour, and advertising impact on sales in the context of business analytics. It includes a five-year projection graph, correlation coefficient calculation, and relevant marketing tactics recommendation.

Module Business analytics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
QUESTION 1...................................................................................................................................3
(a) Mathematical model...............................................................................................................3
(b)Profit or loss of KF Ltd. .........................................................................................................3
(c) graph of five-year projection from January 2023..................................................................4
(d) costing and revenue behaviour...............................................................................................5
QUESTION 2...................................................................................................................................7
(b) Scattered diagram and comment on the relationship between two variables.........................8
(c) Impact of advertising expenditure on sales and recommendation of relevant marketing
tactics...........................................................................................................................................8
QUESTION 3.................................................................................................................................10
(a) Computation of point of Break-even and percentage of margin of safety of 640 computer
sales............................................................................................................................................10
(b) Computation of sales volume that Basu Plc requirement to sale to accomplish target profit
for the year of £56000................................................................................................................11
(c) Formulation of Break-even chart for Basu Plc decently showing Break-even point and
margin of safety.........................................................................................................................12
(d) Critical analysis of benefits and limitations of the break-even model.................................12
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1

INTRODUCTION
Business analytics is set of disciplines and technologies can be work for solving business
problems by with the help of using data analysis and statistical model and different types of
quantitative methods. It is involving methodical exploration of company's data with focus more
on statistical analysis in order to driving decision making. Data driven companies threat their
data as business assets which can be actively looked ways in to turn for getting competitive
advantages (Fernando and Engel, 2018). Then, success with business analytics depend on data
quality in which skill analysts in order to understand the technologies and business for
commitment to using data to gain insight inform business decision. For the present report first
report develop the mathematics model with the help of using costs informations that can be
provided by Joycelyn's influence diagram. Then, study calculating profit and loss of KF Ltd in
order to focus on same information given and prepare five year projection accordingly. Further,
it will compute the correlation coefficient between advertisement expenditure and sales revenue
for Wash well (WW) Ltd. Also, analysing impact of advertisement expenditures on sales in order
to describe relevant marketing tactic and lastly BEP of Basu Plc,or create chart in order to create
and evaluating benefits and limitation of break even model.
MAIN BODY
QUESTION 1
(a) Mathematical model
Total Cost (TC)= Fixed Cost(FC) + Variable Cost(VC)
= £100000 + £1800000
= £1900000
Variable Cost = Unit variable cost * Quantity produced
= £0.90 * 200000
= £180000
(b)Profit or loss of KF Ltd.
This can be assumed that all the units produced by the organization such as KF Ltd are sold in
the market.
Profit and Loss A/c
Particulars Details Am
Sales Revenue 200000 units * £3.00 per unit 600000

Less Variable cost 200000 units * 0.90 per unit 180000
Contribution 420000
Less Fixed cost 100000
Net Profit 4100000
(c) graph of five-year projection from January 2023
Unit
variable
cost
0.95
(0.90 * 106%)
1.01
(0.95 * 106%)
1.07
(1.01 * 106%)
1.13
(1.07 * 106%)
1.20
(1.13* 105%)
Unit
sales
price
3.15
(3*105%)
3.30
(3.15*105%)
3.47
(3.30* 105%)
3.64
(3.47* 105%)
3.82
(3.64* 105%)
Sales
unit
220000
(200000 *
110%)
242000
(220000 *
110%)
266200
(242000 *
110%)
292820
(266200 *
110%)
322102
(292820 *
110%)
Particulars Jan-2023 Jan-2024 Jan-2025 Jan-2026 Jan-2027
Sales
Revenue
693000
(220000*3.15
)
798600
(3.30*24200
0)
923710
(3.47*266200)
968968
(3.64*266200
)
1118572
(3.82*292
820)
Less
Variable
cost
209000
(220000*0.95
)
244420
(1.01*24200
0)
284834
(1.07*266200)
300806
(1.13*266200
)
351384
(1.20*292
820)
Contribution 484000 554180 638876 668162 767188
Less Fixed
cost 100000 100000 100000 100000 100000
Net Profit 384000 45180 538876 568162 667188

F iv e y e a r p ro je c tio n fro m ja n u a ry 2 0 2 3
S ales R ev en u e L ess Va ria b le c ost
C on trib u ti on L ess F ix ed c os t Net Profit
Figure 1: Graphical presentation of five year projection
(d) costing and revenue behaviour
From the above calculation it has been analysed that the revenue behaviour with follows
elements:
Costing and revenue behaviour in General:
This can be change general refers to the situation that related to expenses of organization
according to the change in business activity. This necessary for manager in order to aware of
cost of behaviour so that it help for understanding the same during time of constructing annual
budget. That statement refers as whether cost can be increase or decrease in upcoming period
due to change in internal as well as external business environment. However, revenue behaviour
is also related to manner that can be indicated in order to change organization's revenue as per
change of demand and remaining factor of business environment. Also, costing and revenue
behaviour help for playing vital role in order to construct accurate and better annual budget. That
is why it is beneficial for deciding that whether cost and revenue will spike or decline in future as
per the past trends (Idoko and Akinsunmi, 2020).
Costing and revenue behaviour in context of KF Ltd:
According to the given brief of KF limited it has been evaluated that cost of company is
increasing by 6% in upcoming 5 years. However, sales volume and unit of sales price are 10%
and 5 %. it can be indicating spike costing and revenue behaviour of KF limited. In order to
increase the volume and selling price of KF Ltd. It can be said that sales revenue will be high in

5 years. However, spike in product cost can be identified that variable cost of organization help
for increasing in coming year, That is why it is beneficial for manager that KF Ltd can create for
five year projected income statement of company . In order to analyse profit for coming year
help company that identifying that it is increasing by follow in upwards direction. This is of
percentage of increase in cost is not more than percentage of increase in sales revenue.
Causes of change in cost and sales price are as follows:
There are several changes which find in cost of product of company which are includes:
 Decreases and increase in costs of wages.
 Increase and decrease in taxes on the basis of one cause of change in cost.
 Percentage change in inflation and interest rate can be leading to change on cost of
products or services of organisation.
 Efficiency of an Employee can be consider as the one reason which can cause changes in
cost of product because poor communication and high wastage of resources the cost of
production of company will be increase (Rahim, Giurco and Blumenstein, 2020).
 The, there are different marketing tactics of organisation which can be change in price of
product because with high marketing expenses cost of sales of product increases and vice
versa.
There are other causes of change in price of products of company which includes:
 The rate of goods & services can be changes with shift in supply and market both.
 When the product cost change it also affect the commodity price.
 this is necessary for understand that increase in competition in market as well as it is
related to the higher competition that can be decrease in price of products as customer
can easily shift to other supplier for same products.
 Marketing methods and tactics can be use by company in order to focus more on behind
the product price.
 Further, customer base of organization can because of change in price of products as well
as high customer base of company can be enhanced product price and vice versa (Ying,
Keikhosrokiani and Asl, 2020).
QUESTION 2

Years
Advertising
expenditure (X)
(000)
Annual Sales (Y)
(000) XY (000) X^2 (000)
Y^2
(000)
2017 2 100 200 4 10000
2018 5 70 350 25 4900
2019 4 90 360 16 8100
2020 6 60 360 36 3600
2021 3 80 240 9 6400
Σ 20 400 1510 90 33000
N = 5
Formula of Calculating Correlation coefficient:
r = (n * ΣXY – ΣX * ΣY) / √ [n ΣX2 – (ΣX)2] * [n * ΣY2 – (ΣY)2]
= (5 * 1510 – 20 * 400) / √ [5 * 90 – (20)2] * [5 * 33000 – (400)2]
= (7550- 8000)/ √50*5000
= -450/√ 250000
=-450/500
=-0.9
Comment on above result-
As per the above solution it has been identified that correlation coefficient between annual
advertisement expenditure and annual sales of Wash well ltd is -0.9. On the basis of scales of
correlation coefficient value of r lie between less than 1 which shows the high relation between
annual advertisement expenditure & annual sales of company is increases. That refers as it is
related to the change in annual advertisement expenditure of organisation, the sales of annual
sales can also change. Thus, it has been analysed that advisable to the marketing manager of
WWLtd which can not opt for various marketing tactics that help for company in order to
improve its sales revenue (Tallat, Iqbal and Saleem, 2020). The increased sales revenue can be
lead for increasing profitability of organisation.

(b) Scattered diagram and comment on the relationship between two variables
Figure 2: Scattered diagram plotting relation between two variables
the relationship between two variables:
In order to seen the above chart it has been analysed that there is not indirect relationship pattern
between annual advertisement expenditure and annual sales of WW Ltd. That refers to the
company that how advertisement expenses of annual sales of company will directly increases.
On the other hand, when company will decrease advertisement expenses of organisation that its
annual sales will also decreases. That means it can be shows direct pattern of relationship which
is exist between two variable of WWLtd.
(c) Impact of advertising expenditure on sales and recommendation of relevant marketing tactics
It has been analysed that advertisement expenditure on sales in such manner where
increasing sales of advertisement. This is reason of advertisement the consumer get to understand
related to benefits of products and services. On the basis of current , there are majorities of
people all over world are using internet and online advertisement for their purchase decision
making process. However, when company spend much amount on advertisement it can be
impact by creating loss of company when it effects not getting enough benefit in return (Magner,
Davis and Hiremath, 2022). For example, chosen company has started spending funds in
advertisement from where it can be respond on the basis of low result as well as sales can not
increase accordingly. If advertising content of company is poor or wrong it can be impact by
1.5
2
2.5
3
3.5
4
4.5
5
5.5
6
6.5
020406080100120
f(x) = − 9 x + 116
Relation between annual advertising and annual sales

negative thinking in society because of sales of company can be result negative. This can be lead
to loss of company reputation so that image as well as profit can improve with its performance.
Then, it is necessary for company to do research in order to adopt relevant marketing tactics that
can be enhance their sales which can be gaining competitive advantages.
Recommending marketing tactics-
In order to sum up above informations it can be said that the relevant marketing tactics
can be recommended for company so that it can be help to gain competitive advantages for
selling as much as washing powder.
 Keeping brand looks consistent all marketing platform- This is one of the common
and common marketing techniques which can be followed by organization in order to
understand the taste and preference of customer. On the basis of this marketing tactics
company need to manage brand reputation on the basis providing necessity of using
detergent. This is helpful in order to realising that consumer can look at advertisement by
focus on company have what kinds of product.
 Invest in website marketing- This tactic can be adopted by company in order tos focus
on investing funds on the basis of new and unique website development. With the help
of own website and online delivery services organization can take customer order by 24/7
and ready to work for customer in odd hours and deliver product at doorstep (Cao and
Khan, 2021). Also, it help for enhancing online presence as well as gain competitive
advantages for future by focus more on sales volume and profitability. When company
having good marketing strategy it help company to grow effectively on the basis of
different marketing channels.
 Optimise SEO strategy- Search engine optimisation is help for ranking the website in
order to provide the facility of top of internet searches. Then, it is also help for achieving
by organization in order to optimize well structured website for desired keyword and
phrases. When company having the effective SEO it can be help for crawling as well as
re-0indexing organization website on search engine such as Yahoo, Google, etc. On the
other hand, if company not having its online presence it can be missing out the
opportunity of lacking behind in market.
 Creating style guide- These tactics can be one of the most significant marketing tactic
that help for indicating by organization in order to focus more on creating style for their

consumer on different social media platform for instance, YouTube, Facebook, own
website, Instagram etc., That kind of style can be impacted by purchase of unique product
which can be help in poor knowledge of style. This can be ultimate result in order to use
marketing tactic and help for increasing brand images and customer loyalty. All the
social media platform working well for company as well as it can be help for increasing
customer by creating different types of styles. There are some of the common steps which
are necessary to follow by the company as well as it is necessary for great foundation by
improving content so that it help other user in order to get correct point of it. There are
basis rules of any websites which can be collected by brand collect and store all design
element and rules for its website. For chosen company it has been suggested that the set
of standard for writing and designing content which help for maintain a consistent style
(Cottafava, Miceli and Riccardo, 2021).
 Run consistent and quality image- Blog is one of the trendy tactic for marketing which
is help in present time in order to enhance online presence of company as well as
marketing strategy. In order to use the necessary information it can be said that wash well
company can be share useful information about their product in order to share among all
social media users. On the other hand, company can be ensured related to maintaining
and posting consistent blogs so that it help for engaging customer on regular basis and
gaining competitive advantages. There are large number of customer who are interested
in looking for new blogs in order to focus mores on getting profit as well as it can work
by sharing information to others regarding blog. This is also helped for building network
which is one of the important section which is help for promoting product to large
number of customer (Saleh, Darwis and Ridwan, 2021).
QUESTION 3
(a) Computation of point of Break-even and percentage of margin of safety of 640 computer
sales
BREAK EVEN POINT
Particulars calculation Amount in £
Total revenue 640 units* £600 384000
Variable cost:

labour 640 * £200= £128000
material 640 * £40= £25600
selling 640 * £10= £6400
Less: variable cost 160000
contribution
Fixed cost
Selling and distribution cost £60000
Administration cost £80000
Less: fixed cost 140000
Net profit or (loss) 84000
Break even point formula:
In units= fixed cost/ (selling price per unit – variable cost per unit)
= £140000/(£600-250)
= 400 units
In pounds = fixed cost/ contribution margin
=£140000/ 58.333%
=£240000
Whereas, contribution margin = contribution / sales revenue×100
=£224000/£384000×100
=58.33%
MARGIN OF SAFETY AS A PERCENTAGE OF ETIMATED SALES
Margin of safety = (current sales level – break even point)/current sales level *100
=(640-400)/640×100
=240/640×100
=37.5%

(b) Computation of sales volume that Basu Plc requirement to sale to accomplish target profit for
the year of £56000
Sales volume = (net profit target + fixed cost)/ contribution margin per unit
= (£56000+£140000)/£530
= £196000/350
= 560 computers
As per above mentioned calculations it is determined that Basu plc is required to sell 560
computer software to accomplish the marked profit which is £56000. The current sales of basu
plc is at 640 units and in order to earn a profit of £56000 it needs to sell 560 units. Hence, it
shows that Basu plc's current sales is sufficient to secure the estimated profit of £56000. On
selling the 640 computer software it earns a profit of £84000 and to earn the target profit of
£56000 it sells 560 units. It makes basu plc earn £28000 more than estimated profit. More profit
is always a better option for company. Hence, it can be established that profit is exceeding the
target which is a good indicator (Sambodo, 2021).
(c) Formulation of Break-even chart for Basu Plc decently showing Break-even point and margin
of safety
break even chart's graphical presentation indicating break even point and margin of safety
(d) Critical analysis of benefits and limitations of the break-even model
Break even point is a situation where an organization incurs neither any profit nor any
losses. It is popularly known as no profit no loss situation. Beyond this point the organization

starts to earn profits (Chartady, Salihi and Sitepu, 2021). Let's understand different benefits and
limitations of this model in detail.
Benefits of model:
Making and buying decision: this is an important benefit of break even model where
organization can decide wisely regrading the buying and making of the raw materials, articles,
parts, of the final products. As many times companies have to look for the cost structure which
includes cost analysis. It gives an idea of what is the most beneficial for the company and what
will achieve profits. If in house production or making results in more cost resulting in decresed
profits, then company must outsources same or buy from outside. Basu plc needs a lot of parts
for making computer software and it needs a comprehensive look at cost analysis. If making rises
the prices of end product, then company must buy from outside (Chartady, Salihi and Sitepu,
2021).
Cost cutting: break even model helps company analyse the situation of the cost structure within
the business. As in order to achieve the market cost leadership, many a times company adapts
cost-cutting methods which eliminates cost which is not necessary to make the sales. Break even
model gives an insight of the cost differentiation in case of entertaining the expenses which can
be eliminated.
Production planning: in order to identity the standard units which needs to be produced as base to
cross the break even point of sales, company needs to analyse the production planning. As what
amount of units needs to be produced which marks the break even point and beyond these units
what is the margin of safety for the company. This helps company to identify the production
projection.
Decision making: when an organization decides to invest in the production activities, inviting the
investors onboard for the expansion, break even model helps in making the profitable point of
product forecast. As what is the company's break even, break even also states how much cost
needs in order to produce the goods. As lower the break even point, better it is.
Financial structure: it helps the cost accountant to determine the actual cost structure of the
company and what types of the variable cost can be eliminated and how fixed cost can be more
efficiently cover for the better costing of the final products and break even point. Also, deciphers
the profit and capacity of the company to meet the estimated profits.
Limitations of break even model:

 The Primary limitation of the model is the inability to correlate the cost and revenue
which is not practical enough. Hence, it is the biggest limitation of the break even model.
 Another such limitation is the assumption that production and sales will remain constant
every time which is not the practical aspect in the real life aspects.
 Large scale companies which has large product portfolio can not use this model as it is
not feasible enough to accommodate different profits in the calculations (Li and et.al.,
2019).
 The price dynamics remains the same no matter what ever the point of inflation and
change in cost of raw material the company faces in the due time. At all level of outputs
the price remains the same which eliminates the aspect of economies of scale.
 This model is extremely time-consuming as it is complex to create the charts, data
representation, deriving the break even points. It calls for time management and
cooperative teams in the organization.
 This model leads to the poor employee motivation as they may not be able to achieve the
big sales target which are specified by the break even charts, it may lead to discreet
wastage of resources which indicates poor optimum utilization of resources in the
business.
CONCLUSION
It has been concluded that there are information which can be analysed profit Kb Ltd that
will increase in coming period as well as for 5 years it is getting higher for sales volume and
sales price can be compared in order to increase in variable cost. Also, report can be help by
concluding with correlation between annual expenditure and annual sales of wash well Ltd.
Which is high just because of high correlation coefficient value that is -0.9, Lastly, this report
conclude regarding Basu Plc that can be need by sale at least 4000 piece to make its break even
point. Then, more than 560 computer software it helps by earning earning profit of £560 units.

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