Ron Mesia, Circuit City Supply Chain Manager finds his profit at $15,000 as shows below, he considerthat 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 newequipment. Ron would like to improve the profit line to $25,000 so he can obtain the bank’s approval forthe loan.a) What percentage improvement is needed in a Cost of Material Strategy for the profit to improveto $25,000? Sales, Other Production Cost, and Fixed Cost will remain the same.b) What percentage improvement is needed in Sales for the profit to improve to $25,000? Cost ofMaterial, Other Production Cost, and Fixed Cost will remain the same.Current Situation%DistributionCostofMaterialStartegyPercentIncrease orDecreaseSales StrategyPercentIncrease orDecreaseSales$250,000100%250,0000%Cost of material (supply chain)$175,00070%175,0000%Other production cost$30,00012%30,0000%30,0000%Fixed cost$30,00012%30,0000%30,0000%Profit$15,0006%25,00067%25,00067%
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