core: 0 of 10 pts roblem 11.2 impróved profit picture prior to approval of a loa

Question

core: 0 of 10 pts roblem 11.2 impróved profit picture prior to approval of a loan for some new equipment Hau would like to improve the protet ine to $400 so he can otain the ank's 1 of 2 (1 complete) HW Score: 375% 75 of 20 pts approval for the loan. Question Helpd Sales Cost of material $100,000 S45 000 (45%) $15.00 (15%) $5,000 (5%) S35000 (35%) Fixed cost Profit a) What percentage improvement is needed in the supply chain strategy for profit to improve to $40,000? What is the cost of material it 54 0 A decrease of 1 1.1 % in material (supply-chain) costs is required to yield a profit of S40.000, fr a new mate ial cost of S 40001 Ewmrmm etri" percentage decrease to one decimal place and enter your response for the new matenial cost as a whole number) ovement is needed in the sales strategy for profit to improve to $40,000?7 What must new level of sales of sEnter your aponse br An increase o«D one decimal place and enter your response for the new sales as a whole number) % in sales is required to yield a profit of $40,000, for a new All parts showing

Explanation / Answer

(a)

For $5,000 more profit, a reduction of $5,000 is required for the material cost. So, the new material cost will be $40,000. The % reduction is 5 / 45 = 11.11%

(b)

Let new sales = S

Profit = 40000 = S - 0.45 * S - 0.15 * S - 5,000 [Cost of material and cost of production will be % of sales but the fixed cost will be independent of sales]
or, 0.40 S = 45000
or, S = 112500

So, the new level of sales should be $112,500 and the % increase is (112500 - 100000) / 100000 = 12.5%.

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