Total2. The company's actual labor cost is $102,000 for Procedure 1. Determine the actual cost of direct labor, direct materials, and overhead for each procedure, and the totalcost of production for each procedure.Cost makeup of Procedure 1:Direct LaborDirect MaterialsOverheadTotalCost makeup of Procedure 2:Direct LaborDirect MaterialsOverheadTotal3. 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 itrecycles, and it applies the income from these payments as a direct offset to the cost of the direct materials. These indirect materials normally makeup 80% of the overheadcost 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 toenable the company to meet its target gross profit percentage without changing any other costs.Maximum new cost of P1 overhead materials: $ Strategic initiatives and CSRBlue 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 25% of sales,and its target gross profit percentage is 30%. The company's current monthly sales revenue is $510,000.The new initiative being piloted is to produce goods in-house instead of buying them from wholesale suppliers. Its in-house production process has two procedures. Themakeup of the costs of production for Procedure 1 is 40% direct labor, 45% direct materials, and 15% overhead. The makeup of the costs of production for Procedure 2 is50% direct labor, 25% direct materials, and 25% overhead. Assume that Procedure 1 costs twice as much as Procedure 2.Required:1. Determine what the cost of labor, materials, and overhead for both Procedures 1 and 2 would need to be for the company to meet its target gross profit.Cost makeup of Procedure 1:Direct LaborDirect MaterialsOverheadDirect MaterialsTotalCost makeup of Procedure 2:Direct Labor59,50029,75029,750 ✔$ 119,000 ✓Overhead95,200Total107,10035,700$ 238,000 ✓

Cost refers to the money that is paid or expensed in order to purchase or manufacture an asset. The…

Total 2. The company's actual labor cost is $102,000 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 80% 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 target gross profit percentage without changing any other costs. Maximum new cost of P1 overhead materials: $

Total 2. The company's actual labor cost is $102,000 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 80% 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 target gross profit percentage without changing any other costs. Maximum new cost of P1 overhead materials: $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Total
2. The company's actual labor cost is $102,000 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 80% 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 target gross 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 25% of sales,
and its target gross profit percentage is 30%. The company's current monthly sales revenue is $510,000.
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
50% direct labor, 25% direct materials, and 25% overhead. Assume 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.
Cost makeup of Procedure 1:
Direct Labor
Direct Materials
Overhead
Direct Materials
Total
Cost makeup of Procedure 2:
Direct Labor
59,500
29,750
29,750 ✔
$ 119,000 ✓
Overhead
95,200
Total
107,100
35,700
$ 238,000 ✓

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