Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 24

Direct labor variances-insurance company application The Foster Insurance Company developed standard times for processing claims. When a claim was received at the processing center, it was first reviewed and classified as simple or complex. The standard time for processing was:

Employees were expected to be productive 7.5 hours per day. Compensation costs were $90 per day per employee. During April, which had 20 working days, the following number of claims were processed:

Required: a. Calculate the number of workers that should have been available to process April claims.
b. Assume that 27 workers were actually available throughout the month of April. Calculate a labor efficiency variance expressed as both a number of workers and a dollar amount for the month.