Ron Mesia, Circuit City Supply Chain Ma

Ron Mesia, Circuit City Supply Chain Ma

Ron Mesia, Circuit City Supply Chain Manager finds his profit at $15,000 as shows below, he consider that it is inadequate for expanding his business.
Bank of America is insisting on an improved profit picture prior to approval of a loan for some new equipment. Ron would like to improve the profit line to $25,000 so he can obtain the banks approval for the loan.
What percentage improvement is needed in a Cost of Material Strategy for the profit to improve to $25,000? Sales, Other Production Cost, and Fixed Cost will remain the same.
What percentage improvement is needed in Sales for the profit to improve to $25,000? Cost of Material, Other Production Cost, and Fixed Cost will remain the same.
Current Situation
% Distribution
Cost of Material Startegy
Percent Increase or Decrease
Sales Strategy
Percent Increase or Decrease
Sales
$250,000
100%
250,000
0%
Cost of material (supply chain)
$175,000
70%
175,000
0%
Other production cost
$30,000
12%
30,000
0%
30,000
0%
Fixed cost
$30,000
12%
30,000
0%
30,000
0%
Profit
$15,000
6%
25,000
67%
25,000
67%