Porky replies to your memo by suggesting that overheads can be cut by reducing the cleaning materials, a saving of $5000 for the six months is expected.
However he notes that there would be a fall of 5% in sales due to some fussier pigs objecting.
Should you take up his suggestion?
How will it affect profitability?
This is the sort of situation for which spreadsheets are ideal, let's check out Porky's suggestion using our existing spreadsheet.
Before changing anything in the spreadsheet make sure that you have saved the current version to disk and you write down the existing net profit figure.
[] Position the cursor in the cell containing the TOTAL OVERHEADS of $18000.
[] Porky suggested that $5000 could be saved so enter 13000 into the cell($18000 - $5000).
The spreadsheet recalculates instantly to show a better profit.
Porky also believes that sales will fall by 5% if cleaning costs are cut so lets include this in our spreadsheet.
[] Position the cursor in the cell containing TOTAL SALES.
[] Press F2 to enter EDIT mode.
[] Type *0.95 to multiply the total sales by 95% (equivalent to a 5% decrease in sales).
[] Press the Enter key and the result is calculated.
[] Note the new profit.
By comparing the original profit that you noted with the current profit you can evaluate Porky's suggestion.
Porky also suggests
'Have a Mexican menu as a lunch time special during February.'
It is estimated Food costs for February will fall by $600 and lunch sales will
increase by 50%. Other costs and sales will be unchanged.
Try it!