A01 chaf6542 06 se fm indd

1 

 Cost‑  saving  calculations. Using the input parameters for the two companies in 

Table 7.4, develop a spreadsheet model to calculate traditional overall purchasing 

cost, new overall purchasing cost, percentage change in cost per order and per‑

centage change in overall purchasing cost.

2 

Profitability calculations. Using input parameters of turnover, traditional pur‑

chasing costs, other costs and a 5% reduction in purchasing costs, as shown in 

Table 7.5, develop a model that calculates the profitability before and after introduc‑

tion of e‑procurement and also shows the change in profitability as an absolute (£) 

and as a percentage.

3 

Analyse the sensitivity of the models to differences in volume of orders and values 

of purchases (Table 7.4) and the balance between traditional purchasing costs and 

other costs such as salaries and capital by using the parameters (Table 7.5). Explain 

to the managers the typical characteristics of a company that will make significant 

changes to profitability from introducing e‑procurement.