Amalgamated fenderdenters sales are 10 million the company, Operation Management

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Amalgamated fenderdenters sales are 10 million the company

Problem

Amalgamated Fenderdenter's sales are $10 million. The company spends $3.5 million for purchase of direct materials and $2.5 million for direct labor; over head is $3.5 million and profit is $500,000. Direct labor and direct material vary directly with sales, but overhead does not.

The company wants to double its profit.

a) By how much should the firm increase sales?

(b) By how much should the firm decrease material costs?

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