Pounds-a-Way, Inc., is a manufacturer of exercise equipment for home use. Because of the sharp increase in interest in physical fitness, demand for home- exercise equipment is booming, and Pounds-a-Way has received an unprecedented number of orders. The current factory staff, consisting of two supervisors and twelve factory workers, has been unable to meet this increase in demand in its standard 40-hour work week. As a result, Pounds-a-Way has a backlog of unfilled orders.

Thomas Armstrong, president of the company, is anxious to fill these orders as quickly as possible so that the company will benefit from the boom and not lose customers to competitors. He is trying to decide whether to ask the current employees to work 8 hours of overtime on Saturdays until the backlog is satisfied or to hire three additional workers to work a 40-hour week. He asks you, the company’s accountant, for your advice.

A study of the records and operating procedures at Pounds-a-Way reveals the following:

® The supervisors each earn $12 an hour, and the twelve factory workers each earn $8 an hour.

@ Payroll tax rates are as follows: FICA, 7 percent; FUTA, .8 percent; and SUTA, 5.4 percent.

(For simplicity, assume that no employee has reached the yearly maximum for FICA, FUTA, or SUTA.)

® Employees who have worked for the company at least 18 months are covered by a company-

paid pension plan. All current employees have been with the company over 2 years.

Pounds-a-Way contributes an amount equal to 6 percent of an employee’s gross wages to the pension plan.

™@ The company pays $20 a week for each employee, regardless of length of service, for a hospitalization insurance plan.

™ New employees will be hired at $6 an hour.

® To help the supervisors train the new employees, one of the current factory workers would be promoted to assistant supervisor and receive a raise of $2 an hour.

1. To assist Thomas Armstrong in making his decision, prepare a schedule showing the cost of each alternative.

2. What additional information would be useful in making this decision? What nonmonetary factors should be considered?