Question
Management at Glover & Lamb Inc. is concerned about controlling factory labor - related cost. The followingsummary is the result of an analysis of the
Management at Glover & Lamb Inc. is concerned about controlling factory labor - related cost. The followingsummary is the result of an analysis of the major categories of labor cost for 2013:
Category Amount
Base wages 63,000,000
Health Care benefits 10,500,00
Payroll taxes 5,018,832
Overtime 8,697,600
training 1,875,000
retirement benefits 6,898,500
workers comp 1,199,00
Following are some of the potential cost drivers identified by the company for labor-related costs, along with their 2013 volume levels:
Potential Activity driver 2013 volume level
average number of factory employees 2100
number of new hires 300
number of regular labor hours worked 3,150,000
number of overtime hours worked 288,000
total factory wages paid 71,697,600
volume of production in units 12,000,000
number of production process changes 600
number of production schedule changes 375
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 to the cost pool.
b)Based on your judgements and calculations in (a), which activity driver should receive the most attention from company managers in their efforts to control labor-related cost? How much of the total labor-related cost is attributal to this activity driver?
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