Layman, Inc

question 89

Essay

Layman, Inc., has just completed job nos. 78 and 79, which were similar in terms of complexity, production processes, and units manufactured. Job no. 78 was manufactured by Joe Bingham who earns $14 per hour, whereas job no. 79 was completed by Susan Fortner who earns $20 per hour. If Joe and Susan are equally efficient, would the company be better off using direct labor cost or direct labor hours as the cost driver in its predetermined oerhead rate? Briefly explain.

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Definitions:

Scheme Theory

A cognitive framework or approach that emphasizes the structuring of information into schemas, which are mental representations organizing knowledge and guiding information processing.

Fuzzy Trace Theory

A cognitive psychology theory suggesting people encode information into two types of representations: verbatim (exact details) and gist (the essence or meaning).

Problem Solving

The process of identifying solutions to specific issues or obstacles in a logical and systematic manner.

Applying Rules

The process of utilizing predetermined guidelines or procedural methods in various situations or contexts.