Question

Investing $1,500,000 in TQM's Channel Support Systems initiative will at a minimum increase demand for your products 1.7% in this and in all future rounds. (Refer to the TQM Initiative worksheet in the CompXM Decisions menu.) Looking at the Round 0 Inquirer for Andrews, last year's sales were $163,290,917. Assuming similar sales next year, the 1.7% increase in demand will provide $2,775,946 of additional revenue.   With the overall contribution margin of 34.1%, after direct costs this revenue will add $946,598 to the bottom line. For simplicity, assume that the demand increase and margins will remain at last year's levels. How long will it take to achieve payback on the initial $1,500,000 TQM investment, rounded to the nearest month?

Select: 1

	13 months
	19 months
	6 months
	TQM investment will not have a significant financial impact

Answer 1

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Answer:

A 1.7% increase will mean the saleswill be

=163290917*1.017 =

166066862.6

extral contribution due to 1.7% increase in sales is-

= 2775946*0.341 =

946597.586

. Pay back is the time required to recover this full initial investment. It ascertained by dividing $1,500,000 amount by the net addition in profit per year

= 1500000/

946597.586

= 19.01 ~ 19 months