Kamal Fatehl production manager of Kennesaw Manufacturing, finds his profit at $
ID: 376728 • Letter: K
Question
Kamal Fatehl production manager of Kennesaw Manufacturing, finds his profit at $19,200 (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 profit line to $29,200 so he can obtain the bank's approval for the loan. Sales Cost of supply chain purchases Other production costs Fixed costs Profit 240,000 163,200 33,600 24,000 19,200 % of sales 100% 68% 14% 10% a) What percentage improvement is needed in a supply chain strategy for profit to improve to $29,200? What is the cost of material with a $29,200 profit? A decrease of % in supply-chain costs is required to yield a profit of $29, 200, for a new cost of supply chain purchases of $. (Enter your response for the percentage decrease to one decimal place and enter your response for the new supply chain cost as a whole number) b) What percentage improvement is needed in a sales strategy for profit to improve to $29,200? What must sales be for profit to improve to $29.200? An increase of % in sales is required to yield a profit of $29,200, for a new new level of sales of $. (Enter your response for the percentage increase to one decimal place and enter your response for the new sales as a whole number Enter your answer in each of the answer boxes.Explanation / Answer
a) For Sales to go 29,200 from 19,200, the increase in profit should equal the decrease in cost of supply chain purchases. Thus, cost should go to 163200-10000 = 153200
% decrease = 10000/163200*100 = 6.1%
New cost = 153200
b) Cost of purchase = 68% and Other production cost = 14%
Thus, 82% of sales goes into variable cost. The rest 18% will go to increase profit as fixed cost is one time.
Now, this 18% should be equivalent to 10,000
Hence, 100% = 10000/18*100 = 55,556
Sales should move from 240,000 to 240,000+55556 = 295556
%increase = 55556/240000*100 = 23.1%
Sales = 295,556
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