Score: 0 of 4 pts 44 of 5 (1 complete) Problem 11.6 Using Iable 11.4, determine

Question

Score: 0 of 4 pts 44 of 5 (1 complete) Problem 11.6 Using Iable 11.4, determine the sales necessary to equal a dollar of savings on purchases for a company that has a) A net profit of 2% and spends 60% of its revenue on purchases in this situation $1 savings in supply chan is equvalent to increasing the sales by sll to roalice the same proftl(onter your nesponse to two deaimal places Table 11.4 Table 11.4: Dollars of Additional Sales Needed to Equal $1 Saved through the Supply Chain Percent of Sales Spent in the Supply Chain 40% Percent Net Profit of Firm ee 90% 278$323$3 85 $4 76 $0 25 $9 09 $16 6 $2.70 $3.13 $3 70 $4 55$5 88 $8 33 $14 29 $2 63 $3 03$357 4 35 s5 56 $7 69 $12 50 256 $294 $345 $4 17 $5 26 $7 14$11.11 2 50 286 333$400500 $667$10.00 30% 50% 6 % 70% 80% 2% 4% 6% 0% 10% The required increase in sales assumes that 50% of the costs other than purchases are variable and that half of the remaining costs (less profit) are fed Therefore at sales of S 100 (50% purchases and 2% margr) S50 are purchases, $24 are other variable costs, $24 are fixed costs, and s2 prot, Increasing sales by $3 85 yields the Sollowing Purchases at 50% Other Variable Costs Fixed Cost Prost s 5193 24 92 24.00 3 00 103 85 s3 85 of editional sales, we have increased proftl by S om $2 to $3 The samo increase in margin cou havo beoh obtained by reducing supply chain costs by $1 Print Done

Explanation / Answer

Taking reference from tbe above table, where 2% net profit and 60% sales spent on supply chain, additional sales will be at $4.76.

In this situation,$1 savings in supply chain is equivalent to increasing the sales by $4.76 to realize the same profit.

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