Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the Manager of a business. It could be a retailer, distributor or manufacturer. You are contemplating increasing customer service from 95% to

You are the Manager of a business. It could be a retailer, distributor or manufacturer. You are contemplating increasing customer service from 95% to 98% for your business to better service your customers needs. This means, you will have the product available 98-percent of the time when a customer wants to purchase it. The following are estimated to happen in your business: Assumptions: Sales are currently $80.000,000 Labor would increase $34,000 Direct materials (one-time increase) $40,000 Transportation would increase $60,000 Rent would increase $18,000 to accommodate the additional space to store the inventory Inventory would increase by $3,000.000 Fixed overhead is $100,000 and does not need to be increased above its current level. Inventory carrying cost 25% Contribution Margin on the product 30% You will make the inventory permanent, meaning it will be stored for 365-days 1. If sales are projected to increase by 2%, would you spend the money to increase service levels? Why or why not? You must justify your answer with quantified analysis 2. If sales are projected to increase 8%, would you spend the money to increase service levels? Why or why not? You must justify your answer with quantified analysis.

Step by Step Solution

3.51 Rating (161 Votes )

There are 3 Steps involved in it

Step: 1

There are numerous sorts of trade models Each one changes significantly based on the sort of organiz... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Economics and Business Strategy

Authors: Michael R. baye

7th Edition

978-0073375960, 71267441, 73375969, 978-0071267441

More Books

Students also viewed these Accounting questions