Lakeside Accessories manufactures computer backpacks, messenger bags, and other items for carrying electronics, documents, and so on. In developing a new bag for the newest release of laptops, the design group has estimated the following unit costs:

Fabric	$ 37
Leather	18
Direct labor hours Sewing	1.4
Direct labor hours Assembly	1.0

Direct labor at Lakeside Accessories earns $36 per hour for sewing and $31 per hour for assembly. Overhead is estimated for new products at 40 percent of direct labor cost. Lakeside has a target operating profit of 19 percent (as a percentage of costs) on this type of product. The marketing team has estimated that a price of $191 is expected for the bag.

Required:

a-1. What is the profit as a percentage of cost achieved under this alternative?

a-2. Will Lakeside Accessories achieve the target operating profit for this product?

b-1. The product manager, who is the company's main advocate for this new design, tells you that the he plans to have all the labor (sewing and assembly) done by the assembly labor, because "it is not all that difficult." Under the new plan for producing the bags, what is the profit as a percentage of cost achieved under this alternative?

b-2. Under the new plan for producing the bags, will Lakeside Accessories achieve the target operating profit for this bag?