BMGT 203 ONB Assignment No
Assignment No. 3 - 5% Due November 11, 2014 (show all calculation
1. A transportation firm now spends 60 percent of the sales revenue it receives in the supply chain, and has a net profit margin of 6 percent. The company can invest $100,000 in one of two ventures.
a) How many dollars of additional sales would be required to equal $1 saved through the supply chain?
$4.35 would be required to equal $1 saved through the supply chain
b) One venture is advertising-based, and is expected to increase revenues (sales) by
$600,000 (after spending the $100,000).
P=R-C =$600,000-$100,000 = $500,000
c) The other venture applies the money in supply-chain efficiencies that are expected to save $200,000 (again, after spending the $100,000).
To save $1 its cost $ 4.35
= $4.35 x $200, 00
= $870,000
$870,000- $100,000
=$770,000
d) Which of these two ventures should the company choose? Use Table 11.3, reproduced below.
The company should choose C because it makes more profit
e) If it expects business to improve next year such that it would only spend 30% of its sales revenue in the supply chain (profit margin remains at 6%) should it change its decision in Part d)?
At 30% ($2.63) =$2.63 x $200,000 = $526,000 No, it should not because it is still higher than the first one (500,000)
20 Marks
2. A regional grocery chain spends 70 percent of its sales in the supply chain, and has a net profit margin of 2%. They have just installed a new software system that is expected to deliver efficiencies such that they will save $700,000 per year throughout the supply chain.
These saving will go directly to increase their profits by $700,000. 5 Marks
a) What is the additional or equivalent increase in sales revenue required in order to achieve this $700,000 increase in profits?
$700,000 x $6.25 =
1. A transportation firm now spends 60 percent of the sales revenue it receives in the supply chain, and has a net profit margin of 6 percent. The company can invest $100,000 in one of two ventures.
a) How many dollars of additional sales would be required to equal $1 saved through the supply chain?
$4.35 would be required to equal $1 saved through the supply chain
b) One venture is advertising-based, and is expected to increase revenues (sales) by
$600,000 (after spending the $100,000).
P=R-C =$600,000-$100,000 = $500,000
c) The other venture applies the money in supply-chain efficiencies that are expected to save $200,000 (again, after spending the $100,000).
To save $1 its cost $ 4.35
= $4.35 x $200, 00
= $870,000
$870,000- $100,000
=$770,000
d) Which of these two ventures should the company choose? Use Table 11.3, reproduced below.
The company should choose C because it makes more profit
e) If it expects business to improve next year such that it would only spend 30% of its sales revenue in the supply chain (profit margin remains at 6%) should it change its decision in Part d)?
At 30% ($2.63) =$2.63 x $200,000 = $526,000 No, it should not because it is still higher than the first one (500,000)
20 Marks
2. A regional grocery chain spends 70 percent of its sales in the supply chain, and has a net profit margin of 2%. They have just installed a new software system that is expected to deliver efficiencies such that they will save $700,000 per year throughout the supply chain.
These saving will go directly to increase their profits by $700,000. 5 Marks
a) What is the additional or equivalent increase in sales revenue required in order to achieve this $700,000 increase in profits?
$700,000 x $6.25 =