Han Lee Furniture, Inc, spends 45% of its sales dollars in the supply chain and finds its current profit of $30,000 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 $35,000 so he can obtain the banks approval for the loan.
Current Situation Sales $100,000
Cost of material $45,000 (45%)
Production costs $20,000 (20%)
Fixed cost $5,000 (5%)
Profit $30,000 (30%)
a) What percentage improvement is needed in the supply chain strategy for profit to improve to $35,000? What is the cost of material with a $35,000 profit? A decrease of __% in material(supply-chain) costs is required to yield a profit of $35,000, for a new material cost of $ __ . (Enter your response for the percentage decrease to one decimal place and enter your response for the new material cost as a whole number.
b) What percentage improvement is needed in the sales strategy for profit to improve to $35,000? What must sales be for profit to improve to $35,000? An increase of __% in sales is required to yield a profit of $35,000, for a 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.)