Question

Kamal Fatehl production manager of Kennesaw? Manufacturing, finds his profit at ?$8,000 ?(as shown in the statement? below) inadequate for expanding his business. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Kamal would like to improve profit line to $38,000 so he can obtain the ? approval for the loan. ?% of sales Sales 280,000 ?10%

Cost of supply chain purchases 182,000 65?%

Other production costs 39,200 14?%

Fixed costs 30,800 11?%

Profit28,000 10?%

a) What percentage improvement is needed in a supply chain strategy for profit to improve to 38,000?? What is the cost of material with a ?$38,000 ?profit? A decrease of nothing?% in? supply-chain costs is required to yield a profit of ?$38,000?, for a new cost of supply chain purchases of ?$nothing. ?(Enter your response for the percentage decrease to one decimal place and enter your response for the new supply chain cost as a whole? number.)

?b) What percentage improvement is needed in a sales strategy for profit to improve to ?$38,000?? What must sales be for profit to improve to ?$38,000?? An increase of nothing?% in sales is required to yield a profit of ?$38,000?, for a new new level of sales of ?$nothing. ?(Enter your response for the percentage increase to one decimal place and enter your response for the new sales as a whole? number.)

Answer 1

a)

Old Revised Sales 280000 280000 Less Cost of Supply Chain Purchases 182000 172000 Less Other Production Costs 39200 39200 Less Fixed Costs 30800 30800 Profit 28000 38000

In order to profit to be $ 38,000, Cost of Supply Chain Purchases must be $ 172,000

Cost of Supply Chain Purchases must decrease for profit to be $ 38,000

Percentage to be decreased = [( $ 182,000 - $ 172,000 ) / $ 172,000 ] * 100 = 5.814 % = 5.8 %

b)

Old Revised Sales 280000 290000 Less Cost of Supply Chain Purchases 182000 182000 Less Other Production Costs 39200 39200 Less Fixed Costs 30800 30800 Profit 28000 38000

In order to profit to be $ 38,000, Sales value must be $ 290,000

Sales value must increase for profit to be $ 38,000.

Percentage to be decreased = [( $ 290,000 - $ 280,000 ) / $ 280,000 ] * 100 = 3.5714 % = 3.6 %