Direct labor variances — insurance company application The Foster Insurance Company developed standard times for processing claims. When a claimwas received at the processing center, it was first reviewed and classified as simple or complex. The standard time for processing was:
Simple claim | 36 minutes |
Complex claim | 1.25 hours |
Employees were expected to be productive 7.5 hours 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.
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