Business, 30.04.2021 19:50 natashareeves16

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 $480,000. 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:
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.

1. Cost makeup of Procedure 1:

Direct Labor
Direct Materials
Overhead
Total

2. Cost makeup of Procedure 2:

Direct Labor
Direct Materials
Overhead
Total

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Blue Skies Inc. is a retail gardening company that is piloting a new strategic initiative aimed at i...

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