Strategic Initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company's gross profit is 23% of sales, and its target gross profit percentage is 28%. The company's current monthly sales revenue is $570,000. The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. 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. Cost makeup of Procedure 1: Direct Labor Direct Materials Overhead Total Cost makeup of Procedure 2: Direct Labor Direct Materials Overhead Total

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
2. The company's actual labor cost is $114,000 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
Direct Materials
Overhead
Total
Cost makeup of Procedure 2:
Direct Labor
Direct Materials
Overhead
$
Total
$
3. The company is planning a CSR initiative to recycle the indirect materials used in production during Procedure 1. The company is paid for any of the indirect materials it
recycles, and it applies the income from these payments as a direct offset to the cost of the direct materials. These indirect materials normally makeup 70% of the
overhead cost for Procedure 1. Determine what the maximum new cost (net of recycling revenues) of these indirect materials could be for Procedure 1 if this CSR initiative
were to enable the company to meet its
profit percentage without changing any other costs.
Maximum new cost of P1 overhead materials:
Transcribed Image Text:2. The company's actual labor cost is $114,000 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 Direct Materials Overhead Total Cost makeup of Procedure 2: Direct Labor Direct Materials Overhead $ Total $ 3. The company is planning a CSR initiative to recycle the indirect materials used in production during Procedure 1. The company is paid for any of the indirect materials it recycles, and it applies the income from these payments as a direct offset to the cost of the direct materials. These indirect materials normally makeup 70% of the overhead cost for Procedure 1. Determine what the maximum new cost (net of recycling revenues) of these indirect materials could be for Procedure 1 if this CSR initiative were to enable the company to meet its profit percentage without changing any other costs. Maximum new cost of P1 overhead materials:
Strategic Initiatives and CSR
Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company's gross profit is 23% of
sales, and its target gross profit percentage is 28%. The company's current monthly sales revenue is $570,000.
The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The
makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is
60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2.
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.
Cost makeup of Procedure 1:
Direct Labor
Direct Materials
Overhead
Total
Cost makeup of Procedure 2:
Direct Labor
Direct Materials
Overhead
Total
Transcribed Image Text:Strategic Initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at increasing gross profit. Currently, the company's gross profit is 23% of sales, and its target gross profit percentage is 28%. The company's current monthly sales revenue is $570,000. The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. The makeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is 60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. 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. Cost makeup of Procedure 1: Direct Labor Direct Materials Overhead Total Cost makeup of Procedure 2: Direct Labor Direct Materials Overhead Total
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps

Blurred answer
Knowledge Booster
Planning
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education