Question: Procurement can create value for its firm in many ways and, in fact, reducing supply costs effects both income statement and balance sheet and is

Procurement can create value for its firm in many ways and, in fact, reducing supply costs effects both income statement and balance sheet and is called the Profit Leverage Effect. Suppose a firm's gross sales = $5000 and the total cost of good sold (COGS) = $1300. After subtracting a few other expenditures, the firm's gross profits or pre-tax earnings = $700. Procurement could return a $1 more profit by reducing COGS by a dollar. How much would the firm have to sell (push out in sales) in order to achieve the same effect on profits

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