
a)
To determine: Material cost and percentage change in material cost using supply chain strategy for a profit of $25,000 in Company KF.
Introduction:
a)

Answer to Problem 3P
Using supply chain strategy 5.71% decrease in material cost is required to yield profit of $25,000.
Explanation of Solution
Given information:
Particulars | Amount | Percentage |
Sales | $250,000 | 100% |
Cost of supply chain purchases | $175,000 | 70% |
Production cost | $30,000 | 12% |
Fixed cost | $30,000 | 12% |
Profit | $15,000 | 6% |
Supply chain strategy:
Supply chain strategy | Amount | Percentage increase or decrease |
Sales | $250,000 | |
Material cost | $165,000 | -5.71 |
Production cost | $30,000 | 12% |
Fixed cost | $30,000 | 12% |
Profit | $25,000 | 66.67% |
Calculation of percentage changes using supply chain strategy:
Company KF is expected to increase its profit from $15,000 to $25,000.
Percentage of material cost for profit of $25,000:
For an expected profit for $25,000 from $10,000, the estimated percentage of material cost is 66%.
Material cost for an expected profit $25,000:
Percentage change in material cost for an expected profit $25,000:
The material cost decreased by 5.71%.
Change in profit percentage:
The percentage change in profit, when profit rises from $15,000 to $25,000 is 66.67%.
Hence, by using supply chain strategy 5.71% decrease in material cost is required to yield profit of $25,000.
b)
To determine: Sales and percentage change in sales using sales strategy for a profit of $25,000 in Company KF.
b)

Answer to Problem 3P
By using sales strategy 22.22% increase in sales is required to yield profit of $25,000.
Explanation of Solution
Given information:
Particulars | Amount | Percentage |
Sales | $250,000 | 100% |
Cost of supply chain purchases | $175,000 | 70% |
Production cost | $30,000 | 12% |
Fixed cost | $30,000 | 12% |
Profit | $15,000 | 6% |
Sales Strategy:
Sales strategy | Amount | Percentage increase or decrease |
Sales | $175,000 | 75% |
Material cost | $105,000 (70%) | 75% |
Production cost | $35,000(12%) | 75% |
Fixed cost | $10,000 | 0% |
Profit | $25,000 | 150% |
Calculation of percentage changes using sales strategy:
Calculate the percentage increase in the sales:
Hence, the sales increase to $305,555 when profit is $25,000.
Change in material cost:
For an estimated profit of $25,000, the sales changes to $305,555 and hence due to change in sales there is also change in material cost. Material cost is 70% of sales. Therefore for sales of $305,555, the material cost is $213,889.
Percentage change in material cost:
The percentage change in material cost is 22.22% when the sales increase to $305,555.
Change in production cost:
For an estimated profit of $25,000, the sales changes to $305,555 and hence due to change in sales there is also change in production cost. Production cost is 12% of sales. Therefore for sales of $305,555, the production cost is $36,666.
Percentage change in production cost:
The percentage change in production cost is 22.22% when the sales increase to $305,555.
Change in sales percentage:
The percentage change in sales, when profit rises from $15,000 to $25,000 is 22.22%.
Hence, by using sales strategy 22.22% increase in sales is required to yield profit of $25,000.
Want to see more full solutions like this?
Chapter 11 Solutions
Pearson eText Principles of Operations Management: Sustainability and Supply Chain Management -- Instant Access (Pearson+)
- A local fast-food restaurant processes several customer orders at once. Service clerks’ cross paths, sometimes nearly colliding, while they trace different paths to fill customer orders. If customers order a special combination of toppings on their burgers, they must wait quite some time while the special order is cooked. How would you modify the restaurant’s operations to achieve competitive advantage? Because demand surges at lunchtime, volume flexibility is a competitive priority in the fast-food business. How would you achieve volume flexibility? What are the potential downsides of relying too heavily on automation and standardization in this industry? What data would you want to gather, if any, before making recommendations?arrow_forwardWhat are 4 key points that are interesting about this video https://youtu.be/LAoMuvYZ_QM?si=Mognj_KBU9EIOLSParrow_forwarda) Select all of the correct impacts the maturing of a product might have on OM strategy below. (Check all that apply.) A. Cost cutting is instituted. B. Inventory needs to be revised. C. Labor skills decrease. D. Product design needs to be revised. E. Design compromises are instituted. F. New human resources skills.arrow_forward
- Please help! Multifactor!arrow_forwardKlassen Toy Company, Inc., assembles two parts (parts 1 and 2): Part 1 is first processed at workstation A for 10 minutes per unit and then processed at workstation B for 20 minutes per unit. Part 2 is simultaneously processed at workstation C for 12 minutes per unit. Work stations B and C feed the parts to an assembler at workstation D, where the two parts are assembled. The time at workstation D is 15 minutes. a) The bottleneck of this process is at minutes per unit (enter your response as a whole number).arrow_forwardJust HELParrow_forward
- I need help with C. I'm strugglingarrow_forwardBy signaling their willingness to share information about their interests, but not their BATNA, a negotiator can capitalize on the powerful principle of reciprocity. Which of the following situations best illustrates the reciprocity principle? Group of answer choices A. A car salesman shares information about the town where he grew up, and his custo.mer shares that he also grew up near that town B. A cab driver takes a customer to her hotel and picks up a new customer at the hotel. C. A woman compliments a friend about her purse and the friend says thank you. D. An employee shares information about a project's progress with a coworker who is uncertain.arrow_forwardWhat benefits can negotiators get from using the strategy of multiple equivalent simultaneous offers (MESOs)? Give a real life example.arrow_forward
- What benefits can negotiators get from using the strategy of multiple equivalent simultaneous offers (MESOs)?arrow_forwardWhat is the Perspective on Research? How is the Research from a Biblical perspective conducting Business? What is the connection between Biblical principles and the concepts chosen for conducting Business Research? What is the Perspective on Research? How is the Research from a Biblical perspective conducting Business? What is the connection between Biblical principles and the concepts chosen for conducting Business Research? What is the Perspective on Research? How is the Research from a Biblical perspective conducting Business? What is the connection between Biblical principles and the concepts chosen for conducting Business Research?arrow_forwardwhat is the arithmetic average annual return per year?arrow_forward
- Purchasing and Supply Chain ManagementOperations ManagementISBN:9781285869681Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. PattersonPublisher:Cengage LearningMarketingMarketingISBN:9780357033791Author:Pride, William MPublisher:South Western Educational Publishing
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,Foundations of Business - Standalone book (MindTa...MarketingISBN:9781285193946Author:William M. Pride, Robert J. Hughes, Jack R. KapoorPublisher:Cengage Learning


