scorecard. PR 28-2B Strategic initiatives and CSR Obj. 2, 4 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 $600,000. 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 60% direct labor, 30% direct materials, and 10% overhead. Assume that Procedure 1 costs twice as much as Procedure 2. Instructions 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. 2. The company's actual labor cost is $114,000 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. 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 make up 70% of the overhead cost for Procedure 1. Deter- mine 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. AutoSave FinMan 15e PR 28(14)-20~ File Home Insert Page Layout Formulas Data Review View Help. X Arial 10 A AT Paste BTW- A- Undo Card 19 Font Alignment 19 vXfx A B C D E FGH 1. Target gross profit percentage 30% Search (Alt+Q) % Number Conditional Form Format as table Call Style- Styles J K M N 0 P o R 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: P1 = 2(P2)=(2x Pr. 28(14)-28 Aronsibility investigate 84F Mostly cloudy =2(P2)+P2 = 3(P2) -P2 14-> 144 27 F4 F5 FB FT me Insert Page Layout Data Formulas Review View Help Paste X B I Arial 10 AA === $ % 9 W M A 3 Clipboard B E XVfx C Font D E Cost makeup of Procedure 1: Labor Materials Overhead Total Percentage Cost makeup of Procedure 2: Labor Materials Overhead Total Percentage Labor cost of Procedure 1 Labor cost = Percentage FGH E Alignment Amount Amount 88 Number J K L M NO of P1, so P1 total cost = Procedure 1 cost twice as much as Procedure 2 so P2 total cost = r. 28(14)-2B ssibility: Investigate Cloudy off FinMan 15e PR 28(14)-28 v ave ome Insert Page Layout Formulas Data Review View Help X Arial 10 AA == Paste Clipboard EX 1 B BIU Font fx C D E FGH Cost makeup of Procedure 1: Labor Materials Overhead Total Percentage Cost makeup of Procedure 2: Labor Materials Overhead Total Percentage Amount Amount Alignment Search (Alt+Q) $ % Number EQ J K L M N P Current total cost of production (P1+ P2) Less target total cost of production P1 materials cost savings needed Current P1 overhead materials cost (70% of total overhead) Less P1 thead materials cost savings needed 28(14)-2B ibility: Investigate Oudy