Question

Using the supply chain finance model developed for the above question 1, calculate the impact on:

A) Profit margin
B) Return on assets (ROA)
C) Inventory turns
D) Transportation, warehousing, and inventory costs as a percentage of revenue

Answer 1

The firm's accounting profit is $50,000. Calculations for ROA, Inventory turns, and logistics costs percentage require additional data not provided. The answers are based on expenses and sales revenue figures available.

Step-by-step explanation:

To calculate the firm's accounting profit margin, we need to subtract the total expenses from the sales revenue. With sales revenue of $1 million and expenses totaling $950,000 for labor, capital, and materials, the firm's accounting profit is $50,000. For additional calculations such as the impact on Return on Assets (ROA), Inventory turns, and transportation, warehousing, and inventory costs as a percentage of revenue, more data is required, such as asset values, inventory levels, and specific cost details related to logistics.

To provide guidance, let's consider how to approach these calculations:

1. ROA is calculated by dividing the net income by the total average assets. The net income is already known ($50,000), but without the value of the total assets, we cannot calculate ROA.
2. Inventory turns are determined by dividing the cost of goods sold by the average inventory value. Since we only have the cost for materials, we could make a simplified assumption that materials are the only component of the cost of goods sold and divide $200,000 by the average inventory value, which we don't have.
3. The percentage of transportation, warehousing, and inventory costs relative to revenue requires information on the specific costs associated with these activities. Without this data, the percentage cannot be determined.