Hannah

GilpinGilpin

is the controller of Blakemore Auto$$ Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income.$$ Currently, divisions of Eastern Glass are allocated corporate overhead based on cost of goods sold. Jake

MyersMyers$,$

the president of the$$ division, has asked

GilpinGilpin

to reclassify$$ $$50,000$ of installation$$ labor, which is included in cost of goods$$ sold, as administrative$$ labor, which is not. Doing so will save the division$$ $$20,000$ in allocated corporate overhead. The labor costs in question involve installation labor provided by trainee employees.

MyersMyers

$$argues$,$ "The trainees are not as efficient as regular$$ employees, so this is unfairly inflating our cost of goods sold. This is really a cost of training$($administrative labor$),$ not part of cost of goods$$ sold."

GilpinGilpin

does not see a reason for reclassification of the costs other than to avoid overhead allocation costs.