Problem: Hau Lee Furniture, Inc., spends 60% of its sales dollars in the supply chain and 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.
Current Situation
Sales $100,000
Cost of material $60,000(60%)
Production costs $20,000(20%)
Fixed cost $10,000(10%)
Profit $10,000(10%)
1) 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?
A 25 % decrease in material (supply-chain) costs is required to yield a profit of $25,000, for a new material cost of $ 45000. (Enter your responses as whole numbers.)
2) 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?
A % increase in sales is required to yield a profit of $25,000, for a new level of sales of $/350000|. (Enter your responses as whole numbers.)