(Activity driver analysis and decision making) Thurgood Products is concerned about its ability to control factory labor-related costs. The company has recently finished an analysis of these costs for 1997. Following is a summary of the major categories of labor costs identified by Thurgood’s accounting department:

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 with the cost pool.

b. Based on your judgments and calculations in part

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 at¬ tributable to this activity driver?

c. In the contemporary environment, many firms are asking their employees to work record levels of overtime. What activity driver does this practice suggest is a major contributor to labor-related costs? Explain.LO1

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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 Workers' compensation 800,000