Question: a The Procurement function can impact costs or savings in both balance sheet and income statement. This is called the Profit Leverage Effect. Consider, Cassie

a The Procurement function can impact costs or savings in both balance sheet and income statement. This is called the Profit Leverage Effect. Consider, Cassie Diamond, a retail shop owner who sells flowers. Cassie just negotiated a 18% price reduction on roses from her distributor. This translates to an overall reduction in cost of goods sold (COGS) by 4% (COGS includes other items besides roses). Consider the following table. Cassie will be able to reduce her inventories by with this new rose deal. Current Revenue $/yr $55,000 Current Profit Margin% 10% Current $5,550 Current Inventory Son Balance Sheet $6.200 Pre-Tax Earnings $ Current COGS $26,500 Total Assets $ $12,000 $190 O $312 O $355 $248

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