Sales Cost of materials Production costs CURRENT SITUATION $100,000 $60,000 (60%) SUPPLY CHAIN STRATEGY SALES STRATEGY $100,000 $55,000 (55%) $125,000 $75,000 (60%) $20,000 (20%) $20,000 (20%) $25,000 (20%) Fixed costs Profit $10,000 (10%) $10,000 (10%) $10,000 (8%) $10,000 (10%) $15,000 (15%) $15,000 (12%)
Sales Cost of materials Production costs CURRENT SITUATION $100,000 $60,000 (60%) SUPPLY CHAIN STRATEGY SALES STRATEGY $100,000 $55,000 (55%) $125,000 $75,000 (60%) $20,000 (20%) $20,000 (20%) $25,000 (20%) Fixed costs Profit $10,000 (10%) $10,000 (10%) $10,000 (8%) $10,000 (10%) $15,000 (15%) $15,000 (12%)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
11.3 Hau Lee Furniture, Inc., described in Example 1 of this chapter, finds its current profit of $10,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau 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 the 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 the sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000?
Please provide steps so that I can better understand how the answer is found.
Transcribed Image Text:Sales
Cost of materials
Production costs
CURRENT SITUATION
$100,000
$60,000 (60%)
SUPPLY CHAIN STRATEGY
SALES STRATEGY
$100,000
$55,000 (55%)
$125,000
$75,000 (60%)
$20,000 (20%)
$20,000 (20%)
$25,000 (20%)
Fixed costs
Profit
$10,000 (10%)
$10,000 (10%)
$10,000 (8%)
$10,000 (10%)
$15,000 (15%)
$15,000 (12%)
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