Assignment: Using the numbers below in Table 1, answer the questions below. able

Question

Assignment: Using the numbers below in Table 1, answer the questions below. able l Earnings and Expenses for Q4. 2017: Sales Cost of Goods Sold Profit Pre-negotiation $10,000,000 $9,350,000 650,000 NOTE: Round your answers up I. 2. 3. What is the new COGS after the 8% negotiated reduction? What is the resulting new profit? What is the difference between the old and new profit, both in terms of dollar amount and percentage? (also known as the reduction in COGS) What is the new contribution to profit? How much does the Marketing department need to increase sales in order to match the same increase in profit? 4. 5.

Explanation / Answer

1.

New COGS = 9350000*(1-8%) = $8602000

2.

Resulting new profit = 10000000 – 8602000 = $1398000

3.

Difference in old and new profit = 1398000 – 650000 = $748000

% change in profit = (1398000 – 650000)/650000 = 115.08%

4.

New contribution to profit = $748000

5.

COGS as % of sales = 9350000/10000000 = .935

Increase in sales to earn new profit = 748000/(1-.935)

Increase in sales to earn new profit = $11507692

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