A net profit of 4% on a sales volume of $100 million

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Question from Muriel:

If a firm has a net profit of 4% on a sales volume of $100 million and the company has instituted logistics programs that result in cost savings of $1 million, what equivalent sales increase would be required to equal such
a cost savings?

What I do know is that the net profit % has increased from 4% to 5% and
the profit has gone from $4,000,000 to $5,000,000 but I have no idea what
the formula is to figure out how much sales would have to increase to result in that same profit.

Hi Muriel,

I assume what you saying is: "At 4% net profit, how many sales would be required for $5,000,000 of profit?"

The formula would be:
0.04 x sales=5000000
which results in $125000000 in sales.

Hope this helps,
Janice







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