Question

Kamal Fatehl production manager of Kennesaw​ Manufacturing, finds his profit at 19,600 ​(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 29,600 to so he can obtain the​ bank's approval for the loan.

       % of sales
Sales   280,000 100
Cost of supply chain purchases   190,400   68
Other Production Costs   39,200 14
Fixed Costs   30,800 11
Profit   19,600 7

​a) What percentage improvement is needed in a supply chain strategy for profit to improve to

29,600. What is the cost of material with a. 29600​profit?A decrease of. nothing​in​ supply-chain costs is required to yield a profit offor a new cost of supply chain purchases o​$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.)

What percentage improvement is needed in a sales strategy for profit to improve to 29600 What must sales be for profit to improve to29600?

Answer 1

		% of sales
Sales	280000	100
Cost of supply chain purchase	190400	68
Other production costs	39200	14
Fixed Cost	30800	11
Profit	19600	7

Expected Profit = 29600

Profit = Sales - (cost of supply chain + Other production costs + Fixed Cost) or Sales - cost of supply chain - Other production costs - Fixed Cost.

a. Cost of the supply chain when profit is 29600

Cost of Supply chain = Sales - profit - Other production costs - Fixed Cost.

Cost of Supply chain = 280000 - 29600 - 39200 - 30800 = 180400

Percentage Reduction in supply chain cost = (190400 - 180400) / 190400 = 5.3%

An improvement of 5.3% is needed in the supply chain strategy for profit to improve to 29600.

Assuming other production cost is material cost as the material cost is not given. Also assuming the cost of supply chain has not changed.

Material Cost = Sales - profit - Cost of Supply chain - Fixed Cost. = 280000 - 29600 - 190400 - 30800 = 29200

A decrease of 5.3% of supply-chain costs is required to yield a profit of 29600.

a new cost of supply chain purchases is ​180400

To yield 29600, sales = Cost of Supply Chain + Other Production Costs + Fixed Cost + 29600 = 190400+39200+30800+29600 = 290000

Sales percentage improvement = (290000-280000) / 280000 = 10000 / 280000 = 3.6%