Question

Assume that the cost of the most efficient logistics system for a 97.8% service goal is $2.8 million higher than the existing system's cost. If for each dollar of additional sales, the company incurs 88 cents in out-of-pocket costs, what incremental sales volume, in dollars, will the company need to recover the increase in logistics costs? Your answer must be accurate to the nearest dollar.

Answer 1

incremental sales volume = $23333333.33

Step-by-step explanation:

given data

efficient logistics system = 97.8%

service goal = $2.8 million

company incurs = 88 cents

to find out

what incremental sales volume

solution

we get here incremental sales volume that is express as

incremental sales volume =
`(service\ goal)/(1-company\ incurs)` ..................1

put here value we get

incremental sales volume =
`(2.8 million)/(1-0.88)`

incremental sales volume = $23333333.33