(Cost control activities) The firm of Xtreme Accountants hires full- and part- time professional employees. Full-time experienced staff can be hired for $57,000 per year; fringe benefit costs for each full-time employee amount to 20 percent of base salary. Xtreme Accountants pays part-time professional employees $40 per hour but does not provide any fringe benefits. If a part- time employee has worked for the firm for more than 1,600 hours by year- end, however, he or she receives a $4,000 bonus.

a. Does the firm’s policy of hiring part-time professional staff represent an example of cost containment, cost avoidance, or cost reduction? Explain.

b.For a given professional position, at what level of annual hours worked should the firm consider hiring full-time professional staff rather than part-time? LO.1