(Activity driver analysis and decision making) Elsinore Manufacturing is con¬ cerned about its ability to control factory labor-related costs. The company has recently finished an analysis of these costs for 2006. Following is a sum¬ mary of the major categories of labor costs identified by the company’s ac¬ counting department:

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

b. Based on your judgments and calculations in part (a), which activity dri¬ ver 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.

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Category Amount Base wages $42,000,000 Health care benefits. 7,000,000 Payroll taxes 3,360,000 Overtime 5,800,000 Training 1,250,000 Retirement benefits 4,600,000 800,000 Workers' compensation Following are some of the potential cost drivers identified by the company for labor-related costs, along with their 2006 volume levels. Potential Activity Driver Average number of factory employees Number of new hires 2006 Volume Level 1,400 200 2,100,000 Number of regular labor hours worked Number of overtime hours worked Total factory wages Volume of production in units Number of production process changes Number of production schedule changes 192,000 $47,800,000 8,000,000 400 250