In the contemporary environment many firms ask their

Reference no: EM13586050

Management at Glover & Lamb Inc. is concerned about controlling factory labor-related costs. The following summary is the result of an analysis of the major categories of labor costs for 2013:

Category Amount

Base wages $63,000,000

Health-care benefits 10,500,000

Payroll taxes 5,018,832

Overtime 8,697,600

Training 1,875,000

Retirement benefits 6,898,500

Workers' compensation 1,199,940

Following are some of the potential cost drivers identified by the company for laborrelated costs, along with their 2013 volume levels:

Potential Activity Driver 2013 Volume Level

Average number of factory employees 2,100

Number of new hires 300

Number of regular labor hours worked 3,150,000

Number of overtime hours worked 288,000

Total factory wages paid $71,697,600

Volume of production in units 12,000,000

Number of production process changes 600

Number of production schedule changes 375

a. For each cost pool, determine the cost per unit of the activity driver using the activity driver that you believe has the closest relationship to the cost pool.

b. Based on your judgments and calculations in (a), which activity driver should receive the most attention from company managers in their efforts to control labor-related costs? How much of the total labor-related cost is attributable to this activity driver?

c. In the contemporary environment, many firms ask their employees to work record levels of overtime. What activity driver does this practice suggest is a major contributor to labor-related costs? Explain.

Reference no: EM13586050

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