solution

Using able 112, determine the sales necessary to equal a dollar of savings on purchases for a company that has: a) A net profit of 4% and spends 40% of its revenue on purchases. In this situation, $1 savings in supply chain is equivalent to increasing the sales by $ to realize the same profit (enter your response to two decimal places). b) A net profit of 10% and spends 50% of its revenue on purchases. In this situation, $1 savings in supply chain is equivalent to increasing the sales by $ to realize the same profit (enter your response to two decimal places). Percent Net Profit of Firm 2% 4% 6% 8% 30% $2.78 $2.70 $2.63 $2.56 $2.50 Percent of Sales Spent in the Supply Chain 40% 50% 60% 70% 80% $3.23 $3.85 $4.76 $6.25 $9.09 $3.13 $3.70 $4.55 $5.88 $8.33 $3.03 $3.57 $4.35 $5.56 $7.69 $2.94 $3.45 $4.17 $5.26 $7.14 $2.86 $3.33 $4.00 $5.00 $6.67 90% $16.67 $14.29 $12.50 $11.11 $10.00 10% *The required increase in sales assumes that 50% of the costs other than purchases are variable and that half of the remaining costs (less profit) are fixed. Therefore, at sales of $100 (50% purchases and 2% margin), $50 are purchases, 524 are other variable costs, $24 are fixed costs, and $2 profit. Increasing sales by $3.85 yields the following: Purchases at 50% $ 51.93 Other Variable Costs 24.92 Fixed Cost 24.00 Profit 3.00 $103.85 Through $3.85 of additional sales, we have increased profit by $1, from $2 to $3. The same increase in margin could have been obtained by reducing supply chain costs by $1.