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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.

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.)

Example 1