Question Completion:
simple claim - 36 mins
complex claim - 1.25 hrs
Employees were expected to be productive 7.5 hrs per day. Compensation costs were $135 per day per employee. During July, which had 20 working days, the following number of claims were processed:
simple claims - 3,000 processed
complex claims - 960 processed
REQUIRED
a. Calculate the number of workers that should have been available to process July claims.
b. Assume that 23 workers were actually available throughout the month of july. calculate a labor efficiency variance expressed as both a number of workers and a dollar amount for the month.
Answer:
The Foster Insurance Company
a. The number of workers that should have been available to process July claims is;
= 20 workers.
b. Labor efficiency variance:
Number of workers = 3 U
Dollar value of variance = $8,100 U
Explanation:
a) Data and Calculations:
Standard time for processing simple claims = 36 minutes (0.6 hours)
Standard time for processing complex claims = 1.25 hours
Compensation costs per employee per day = $135
Expected number of hours per employee per day = 7.5 hours
Number of days worked in the month of July = 20 days
Number of simple claims processed = 3,000
Number of complex claims processed = 960
Total number of hours for processing claims in July:
Simple claims = 1,800 (3,000 * 0.6 hours)
Complex claims = 1,200 (960 * 1.25 hours)
Total hours worked in July = 3,000 hours
Hours worked per day = 150 hours (3,000/20 days)
Standard number of workers to process July claims = 20 (150/7.5)
Actual number of workers available for July claims = 23
Labor efficiency variance:
Number of workers = 3 U (20 - 23)
Dollar value of variance = $8,100 U (20 - 23) * ($135 * 20)
