(Activity analysis) Management at Glover & Lamb Inc. is concerned about controlling factory labor related costs. The following summary is the result of an analysis of the major categories of labor costs for 2010:
| Category Don't use plagiarized sources. Get Your Custom Essay on what activity driver does this practice suggest is a major contributor to labor rela 641319 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! | Amount |
| Base wages | $63,000,000 |
| Health care benefits | 10,500,000 |
| Payroll taxes | 5,018,832 |
| Overtime | 8,697,600 |
| Training | 1,875,000 |
| Retirement benefits | 6,898,500 |
| Workers’ compensation | 1,199,940 |
Following are some of the potential cost drivers identified by the company for labor related costs, along with their 2010 volume levels:
| Potential Activity Driver | 2010 Volume Level |
| Average number of factory employees | 2,100 |
| 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 judgments and calculations in (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 attributable to this activity driver?
c. In the contemporary environment, many firms ask their employees to work record levels of overtime. What activity driver does this practice suggest is a major contributor to labor related costs? Explain.
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