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Quicksaw 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 $$2,400,000.$ Currently, the company's gross profit is $35\%$ of sales, but the company's target gross profit percentage is $40\%.$ The company's current monthly cost of production is $$1,560,000.$ Of this cost, $50\%$ is for labor, $30\%$ is for materials, and $20\%$ 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 costs of production for Procedure $2$ is currently $50\%$ direct labor, $20\%$ direct materials, and $30\%$ overhead. Company management estimates 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 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

Overhead

Total

$

$2.$ The company's actual direct materials cost is $$446,400$ 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.

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