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Using determine the sales necessary to equal a dollar of savings on purchases for a company that has: a) A net profit of 4% and
Using 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 6% and spends 80% 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). Table 11.4 Table 11.4: Dollars of Additional Sales Needed to Equal \$1 Saved through the Supply Chain* 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, $24 are other variable costs, $24 are fixed costs, and $2 profit. Increasing sales by $3.85 yields the following: 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
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