Using the Data Below, If Direct Materials Can Be Reduced

Essay

Using the data below, if direct materials can be reduced by 10% and direct labor by 5%, the improvement in profit would be: $\begin{array}{llcc}&& \text { Dollars }& \text { Percent of Sales}\\ \text { Revenue } &&\$1,000,000&100\%\\ \text { Cost of Goods Sold } &\\ \text {Direct Material } &\$500,000&&50\%\\ \text { Direct Labor} &\$200,000&&20\%\\ \text {Factory Overhead } &\$200,000&&20\%\\ \text {Total Cost of Goods } &&\underline{\$900,000}&90\%\\\text { Sold }\\ \text {Gross Profit } &&\$100,000&10\%\\\end{array}$