Problem 4-41 Name:
Insert your answers in gray-shaded cells. If an answer is incorrect,
the word “wrong” will appear.
a. Base wages 63,000,000$
Direct labor hours 3,150,000
Base wages per DLH 20.00$
Health care benefit costs 10,500,000$
Average number of factory employees 2,100
Health care cost per employee 5,000.00$
Payroll taxes 5,018,832$
Total wages 71,697,600
Payroll taxes per dollar of total wages 0.07$
Overtime costs 8,697,600$
Units of production 288,000
Overtime cost per unit 30.20$
Training costs 1,875,000$
Number of new hires 300
Training cost per new hire 6,250.00$
Retirement cost 6,898,500$
Average number of factory employees 2,100
Retirement cost per employee 3,285.00$
Workers’ Compensation Cost 1,199,940$
Average number of factory employees 2,100
Workers’ Compensation Cost per employee 571.40$
b.
Although more labor-related items are driven by the number of factory workers,
the number of regular labor hours accounts for most of the labor costs.
Solution
c.
It can be inferred that the use of overtime hours minimizes some cost drivers. In
this example, use of overtime hours would help contain health care costs, training
costs, retirement costs and workers’ compensation.