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Overhead Total 2. The company's actual direct materials cost is $446,400 for Procedure 1. Determine the actual cost of direct labor, direct materials, and overhead for each proce and the total cost of production for each procedure. Cost makeup of Procedure 11 Direct Labor 720,000 X Direct Materials Overhead Total 648,000 X 72,000 X 1,440,00 X Cost makeup of Procedure 2: Direct Labor Direct Materials

Overhead Total 2. The company's actual direct materials cost is $446,400 for Procedure 1. Determine the actual cost of direct labor, direct materials, and overhead for each proce and the total cost of production for each procedure. Cost makeup of Procedure 11 Direct Labor 720,000 X Direct Materials Overhead Total 648,000 X 72,000 X 1,440,00 X Cost makeup of Procedure 2: Direct Labor Direct Materials

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Overhead Total 2. The company's actual direct materials cost is $446,400 for Procedure 1. Determine the actual cost of direct labor, direct materials, and overhead for each procedure, and the total cost of production for each procedure. Cost makeup of Procedure 1: Direct Labor 720,000 X Direct Materials 648,000 X Overhead 72,000 X 1,440,00 X Total Cost makeup of Procedure 2: Direct Labor Direct Materials Overhead Total 3. The company is planning a CSR initiative to reuse some of the indirect materials used in production during Procedure 2. These indirect materials normally makeup 70% of the overhead cost for Procedure 2, but the CSR initiative would reduce the usage of indirect materials. Determine what the maximum new cost of these indirect materials could be for Procedure 2 if this CSR initiative is expected to enable the company to meet its target gross profit percentage (holding all other costs constant). Maximum new cost of P2 overhead materials: S 288,000 X
Transcribed Image Text:Overhead Total 2. The company's actual direct materials cost is $446,400 for Procedure 1. Determine the actual cost of direct labor, direct materials, and overhead for each procedure, and the total cost of production for each procedure. Cost makeup of Procedure 1: Direct Labor 720,000 X Direct Materials 648,000 X Overhead 72,000 X 1,440,00 X Total Cost makeup of Procedure 2: Direct Labor Direct Materials Overhead Total 3. The company is planning a CSR initiative to reuse some of the indirect materials used in production during Procedure 2. These indirect materials normally makeup 70% of the overhead cost for Procedure 2, but the CSR initiative would reduce the usage of indirect materials. Determine what the maximum new cost of these indirect materials could be for Procedure 2 if this CSR initiative is expected to enable the company to meet its target gross profit percentage (holding all other costs constant). Maximum new cost of P2 overhead materials: S 288,000 X
Strategic initiatives and CSR Quicksaw Inc. is a production company that is in the process of testing a strategic initiative aimed at increasing gross profit. The company's current sales revenue is $2,400,000. Currently, the company's gross profit is 35% of sales, but the company's target gross profit percentage is 40%. The company's current monthly cost of production is $1,560,000. Of this cost, 60% is for labor, 20% is for materials, and 20% is for overhead. The strategic initiative being tested at Quicksaw is a redesign of its production process that splits the process into two sequential procedures. The makeup of the costs of production for Procedure 1 is currently 50% direct labor, 45% direct materials, and 5% overhead. The makeup of the costs of production for Procedure 2 is currently 55% direct labor, 25% direct materials, and 20% overhead. Company management estimates that Procedure 1 costs twice as much as Procedure 2. Required: 1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit at the current level of sales. Cost makeup of Procedure 1: Direct Labor 936,000 X Direct Materials Overhead Total 312,000 X 1,560,00 X 1,440,00 X Cost makeup of Procedure 2: Direct Labor Direct Materials
Transcribed Image Text:Strategic initiatives and CSR Quicksaw Inc. is a production company that is in the process of testing a strategic initiative aimed at increasing gross profit. The company's current sales revenue is $2,400,000. Currently, the company's gross profit is 35% of sales, but the company's target gross profit percentage is 40%. The company's current monthly cost of production is $1,560,000. Of this cost, 60% is for labor, 20% is for materials, and 20% is for overhead. The strategic initiative being tested at Quicksaw is a redesign of its production process that splits the process into two sequential procedures. The makeup of the costs of production for Procedure 1 is currently 50% direct labor, 45% direct materials, and 5% overhead. The makeup of the costs of production for Procedure 2 is currently 55% direct labor, 25% direct materials, and 20% overhead. Company management estimates that Procedure 1 costs twice as much as Procedure 2. Required: 1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit at the current level of sales. Cost makeup of Procedure 1: Direct Labor 936,000 X Direct Materials Overhead Total 312,000 X 1,560,00 X 1,440,00 X Cost makeup of Procedure 2: Direct Labor Direct Materials
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