Hau Lee Furniture, Inc., spends 45% of its sales dollars in the supply chain and finds its current profit of $35,000 inadequate. The /bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau would like to improve the profit line to $40,000 so he can obtain the bank's approval for the loan.

Current situation

sales $140,000

cost of material $63,000 (45%)

production costs $35,000 (25%)

fixed cost $7,000 (5%)

profit $35,000 (25%)

a) what percentage improvement is needed in the supply chain strategy for profit to improve to $40,000? What is the cost of material with a $40,000 profit?

A decrease of ______% in material (supply-chain) costs is required to yield a profit of $40,000, for new material cost of $________. (enter your response for the percentage decrease to one decimal place and enter your response for the new material cost as a whole number.)

b) What percentage improvement is needed in the sales strategy for profit to improve to $40,000? What must sales be for profit to improve to $40,000?

An increase of ___% in sales is required to yield a profit of $40,000, for a new level of sales of $_______. (enter your response for the percentage increase to one decimal place and enter your response for the new sales as a whole number.)