Chapter 15, Problem 15.21P

Problem 15.21

LO 4, 5

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:

Simple claim	45 minutes
Complex claim	2.5 hours

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:

Simple claims 3,000 processed

Complex claims 600 processed

Required:

1. Calculate the number of workers that should have been available to process April claims.
2. 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.