Kamal Fatehl production manager of Kennesaw Manufacturing, finds his profit at $
ID: 363706 • Letter: K
Question
Kamal Fatehl production manager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in the statement below)-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. 9i OF SALES ales Cost of supply chain purchases Other production costs Fixed costs Profit $250,000 175,000 0,000 0,000 100% 70% 12% 12% 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 S25,000 profit? b) b) What percentage improvement is needed in a sales strategy for profit to improve to S25,000? What must sales be for profit to improve to $25,000? (Hint: See Example 1.)Explanation / Answer
Percentage improvement needed in a supply chain strategy for profit to improve to 25000 = (Required Profit – Current Profit)/Cost of supply chain purchases
= (25000 – 15000)/175,000
= 10000/175000 = 5.71% decrease
Cost of material with 25000 $ profit = 175000 – 10000 = 165000 $
Percentage improvement needed in a Sales strategy for profit to improve to 25000 $ = (Required Profit – Current Profit)/Sales
= 10,000/250,000 = 4% increase
Sales for profit of 25000 $ = 250,000 + 10,000 = 260,000 $
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