Obj. 2,4 Get Hitched Inc. is a production company that is in the process of testing a strategic initiative aimed at increasing gross profit. The company's current sales revenue is $1.5 million. 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 $975,000. Of this cost, 60% is for labor, 30% is for materials, and 10% is for overhead. The strategic initiative being tested at Get Hitched 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 costs of production for Procedure 2 is currently 55% direct labor, 25% direct materials, and 20% overhead. Company management estimates 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 at the current level of sales. 2. The company's actual direct materials cost is $279,000 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. Answer: Check Figure: Total cost of Procedure 2: $310,000 3. The company is planning a CSR initiative to reuse some of the indirect materials used in production during Procedure 2 . These indirect materials normally make up 60% of the overhead cost for Procedure 2 , but the CSR initiative would reduce the usage of indirect materials. Determine what the maximum new cost of these indirect materials could be for Procedure 2 if this CSR initiative is expected to enable the Total cost of production percentage Total sales Total cost of production percentage Target cost of production Total Cost of Production = Cost of Procedure 1(P1)+ Cost of Procedure 2(P2) Total cost of Procedure 1 is twice that of Procedure 2: P1=2(P2) Substitute for P1 in the formula: =2(P2)+P2=3(P2)=P2P1=2(P2)=(2)= Cost makeup of Procedure 1: Labor Materials Overhea Total Cost makeup of Procedure 2: Materials cost of Procedure 1 Percentane Materials cost = of P1, so P1 total cost = Procedure 1 cost twice as much as Procedure 2, so P2 total cost =