Answered: % OF SALES Sales $250,000 100% Cost of…

% OF SALES Sales $250,000 100% Cost of supply chain purchases 175,000 70% Other production costs 30,000 12% Fixed costs 30,000 12% Profit 15,000 6%

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter2: The Purchasing Process

Section: Chapter Questions

Problem 4DQ

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Question

Kamal Fatehl, production ma nager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in the following statement)- 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 the profit line to $25,000 so he can obtain the bank's approval for the loan. a) What percentage improvement is needed in a supply chain strategy for profit to improve to $25,000? What is the cost of material with a $25,000 profit?
b) What percentage improvement is needed in a sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000?

% OF SALES
Sales
$250,000
100%
Cost of supply chain purchases
175,000
70%
Other production costs
30,000
12%
Fixed costs
30,000
12%
Profit
15,000
6%

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