Strategic initiatives and CSR Quicksaw Inc. is a production company that is in the process of testing
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Question:
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 curre sales revenue is $2,100,000. 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 $1,365,000. Of this cost, 40% is for labor, 20% is for materials, and 40% 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 cost production for Procedure 2 is currently 55% direct labor, 25% direct materials, and 20% overhead. Company management estimates that Proced 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 gr profit at the current level of sales. Cost makeup of Procedure 1: Direct Labor Direct Materials Overhead Total Cost makeup of Procedure 2: Direct Labor Direct Materials
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