Answer:
Spdey Enterprises
The percentage improvement in Sales to achieve the desired profit is:
c. 42.86% increase in sales.
Explanation:
a) Data and Calculations:
Normal profit level = $8 million
Expected profit level = $14 million
Normal Expected
Sales per year $40,000,000 $57,142,857
Cost of purchases 16,000,000 22,857,143
Production costs 10,000,000 14,285,714
Variable costs 26,000,000 37,142,857
Total contribution $14,000,000 $20,000,000
Fixed costs 6,000,000 6,000,000
Profit level $8,000,000 $14,000,000
Expected Contribution = Expected profit level + Fixed Costs
Normal Contribution = 35% of Sales
Normal Variable costs = 65% (100% - 35%)
Expected Contribution = $20,000,000 = 35% of Sales
Therefore, Expected Sales = $57,142,857 ($20,000,000/35%)
Normal Sales = $40,000,000
Expected Sales = $57,142,857
Percentage increase = 42.86% ($57,142,857 - $40,000,000)/$40,000,000
