The profit-leverage effect of supply savings means that:
A) a reduction in money tied up in inventory improves profits.
B) a reduction in purchase spend increases profit more than an equal sales increase.
C) effective price negotiations with a supplier will lower the supplier's profits.
D) the buyer gains leverage over suppliers when purchases are standardized.
E) efficient and effective supply management processes will increase profits.

Question

Quizplus · Accepted Answer

The profit-leverage effect of supply savings indicates that reducing purchase spend has a more significant impact on increasing profit than an equivalent increase in sales, due to the direct effect on the bottom line without the associated costs of generating additional sales.

The Profit-Leverage Effect of Supply Savings Means That