Hau Lee um ure nc spends 55% ofits sales dollars in he supp y chain and finds it
ID: 358770 • Letter: H
Question
Hau Lee um ure nc spends 55% ofits sales dollars in he supp y chain and finds its curren pro to 515,000 so he can obkain the banks approval for the loan of $10.000 nadequate. The bankis insisting on an improved profi picture prior to approval o a loan or some new equipment. Hau would like to improve he pro line Sales Cost of material Production costs Fixed cost Profit Current Situation $100.000 $65,000 (55%) S20.000 (2096) $15,000 (15%) $10,000(10% a) What percentage improvement is needed in the supply chain strategy for prolit to improve to $15,000 What is the cost of material with a $15,000 prot? A decrease of % in material (supply-chain) costs is required to yield a proft of $15,000, for a new material cost of $ Enter your rsspanse for the percenfage dscrease to ane decimal placs and enter your response for the new mafsial cost s8 a whole numbe b) What percentage impravement is needed in the sales strategy for profit to improve to $15,000? What must sales be for proft to improve to $15,0007 An increase of % in sales is required to yield a profit of $15,000, for a new new level of sales of $ (Enter your response for the percentage increase to one decenal place and enter your response for the neeales es whole number)Explanation / Answer
Profit = Sales – Cost of material – Production cost – Fixed cost
When profit increases to $15,000 from $10,000 , required improvement is = $15000 - $10000 = $5000
Since increase in profit is directly linked to corresponding decrease in cost of material , the required cost of material to make profit as $15,000 will be $50,000 ( from current level of $55,000 )
The percentage decrease in cost of material
= ( Original cost of material – Revised cost of material ) / Original cost of material x 100
= ( 55,000 - 50,000 )/ 55,000 x 100
= 500,000 / 55,000
= 9.09 % ( 9.1 % rounded to one decimal place )
A DECREASE OF 9.1% IN MATERIAL ( SUPPLY CHAIN ) COSTS IS REQUIRED TO YIELD A PROFIT OF $15,000 FOR A NEW MATERIAL COST OF $50,000
When profit increases to $15,000 from $10,000 , required improvement is = $15000 - $10000 = $5000
Since increase in profit is directly linked to increase in sales value , the required sales value to make profit as $15,000 will be $105,000 ( from current level of $100,000 )
Thus percentage increase in sales
= ( Increased sales value – Initial sales value)/ Initial sales value x 100
= ( 105,000 – 100,000)/100,000 x 100
= 500,000 / 100,000
= 5%
AN INCREASE OF 5% IN SALES IS REQUIRED TO YILED A PROFIT OF $15,000 FOR A NEW LEVEL OF SALES OF $ 105,000
A DECREASE OF 9.1% IN MATERIAL ( SUPPLY CHAIN ) COSTS IS REQUIRED TO YIELD A PROFIT OF $15,000 FOR A NEW MATERIAL COST OF $50,000
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