Kamal Fatehl, production manager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in the statement below)-inadequate for expanding his business. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Kamal would like to improve the profit line to $25,000 so he can obtain the bank's approval for the loan.
% of Sales
Sales: $250,000 100%
Cost of supply chain purchases $175,000 70%
Others production costs $30,000 12%
Fixed Costs $30,000 12%
Profit $15,000 6%
a) What percentage improvement is needed in a 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 a sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000? (Hint: See Example 1.)
Please show all steps when completing the work to help me understand to problem.