Standards for nonmanufacturing expenses for a service company The Radiology Department provides imaging services for Emergency Medical Center. One important activity in the Radiology Department in transcribing digitally recorded analysis of images into a written report. The manager of the Radiology Department determined that the average transcriptionist could type 700 lines of a report in an hour. The plan for the first week in May called for 81,900 typed lines to be written. The Radiology Department has three transcriptionists. Each transcriptionist is hired from an employment firm that requires temporary employees to be hired for a minimum of a 40-hour week. Transcriptionists are paid $23.00 per hour. The manager offered a bonus if the department could type more lines for the week, without overtime. Due to high service demands, the transcriptionists typed more lines in the first week of May titan planned. The actual amount of lines typed in the first week of May was 88,900 lines, without overtime. As a result, the bonus caused the average transcriptionist hourly rate to increase to $30.00 per hour during the first week in May. Instructions 1. If the department typed 81,900 lines according to the original plan, what would have been the labor time variance? 2. What was the labor time variance as a result of typing 88,900 lines? 3. What was the labor rate variance as a result of the bonus? 4. The manager is trying to determine if a better decision would have been to hire a temporary transcriptionist to meet the higher typing demands in the first week of May, rather than paying out the bonus. If another employee was hired from the employment firm, what would have been the labor time variance in the first week? 5. Which decision is better, paying the bonus or hiring another transcriptionist? 6. Are there any performance-related issues that the labor time and rate variances fail to consider? Explain.

BuyFind

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
BuyFind

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

Solutions

Chapter
Section
Chapter 22, Problem 22.5BPR
Textbook Problem

Standards for nonmanufacturing expenses for a service company

The Radiology Department provides imaging services for Emergency Medical Center. One important activity in the Radiology Department in transcribing digitally recorded analysis of images into a written report. The manager of the Radiology Department determined that the average transcriptionist could type 700 lines of a report in an hour. The plan for the first week in May called for 81,900 typed lines to be written. The Radiology Department has three transcriptionists. Each transcriptionist is hired from an employment firm that requires temporary employees to be hired for a minimum of a 40-hour week. Transcriptionists are paid $23.00 per hour. The manager offered a bonus if the department could type more lines for the week, without overtime. Due to high service demands, the transcriptionists typed more lines in the first week of May titan planned. The actual amount of lines typed in the first week of May was 88,900 lines, without overtime. As a result, the bonus caused the average transcriptionist hourly rate to increase to $30.00 per hour during the first week in May.

Instructions

  1. 1. If the department typed 81,900 lines according to the original plan, what would have been the labor time variance?
  2. 2. What was the labor time variance as a result of typing 88,900 lines?
  3. 3. What was the labor rate variance as a result of the bonus?
  4. 4. The manager is trying to determine if a better decision would have been to hire a temporary transcriptionist to meet the higher typing demands in the first week of May, rather

than paying out the bonus. If another employee was hired from the employment firm, what would have been the labor time variance in the first week?

  1. 5. Which decision is better, paying the bonus or hiring another transcriptionist?
  2. 6. Are there any performance-related issues that the labor time and rate variances fail to consider? Explain.

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Chapter 22 Solutions

Financial & Managerial Accounting
Ch. 22 - Direct materials variances Lo-bed Company produces...Ch. 22 - Direct materials variances Dvorak Company produces...Ch. 22 - Direct labor variances Lo-bed Company produces a...Ch. 22 - Direct labor variances Dvorak Company products a...Ch. 22 - Factory overhead controllable variance Lo-bed...Ch. 22 - Factory overhead controllable variance Dvorak...Ch. 22 - Factory overhead volume variance Lo-bed Company...Ch. 22 - Factory overhead volume variance Dvorak Company...Ch. 22 - Standard cost journal entries Lo-bed Company...Ch. 22 - Standard cost journal entries Dvorak Company...Ch. 22 - Income statement with variances Prepare a 2016...Ch. 22 - Income statement with variances Prepare a 2016...Ch. 22 - Activity inputs and outputs The following are...Ch. 22 - Activity inputs and outputs The following are...Ch. 22 - Standard direct materials cost per unit Choco La...Ch. 22 - Standard product cost Wood You Lie To Me Furniture...Ch. 22 - Budget performance report Genie in a Bottle...Ch. 22 - Direct materials variances The following data...Ch. 22 - Direct materials variances Silicone Engine Inc....Ch. 22 - Standard direct materials cost per unit from...Ch. 22 - Standard product cost, direct materials variance...Ch. 22 - Direct labor variances The following data relate...Ch. 22 - Direct labor variances Greeson Clothes Company...Ch. 22 - Direct labor standards for nonmanufacturing...Ch. 22 - Direct labor standards for a service company One...Ch. 22 - Direct labor variances for a service company...Ch. 22 - Direct materials and direct labor variances At the...Ch. 22 - Flexible overhead budget Leno Manufacturing...Ch. 22 - Flexible overhead budget Wiki Wiki Company has...Ch. 22 - Factory overhead cost variances The following data...Ch. 22 - Factory overhead cost variances Blumen Textiles...Ch. 22 - Factory overhead variance corrections The data...Ch. 22 - Factory overhead cost variance report Tannin...Ch. 22 - Recording standards in accounts Cioffi...Ch. 22 - Recording standards in accounts "The Assembly...Ch. 22 - Income statement indicating standard cost...Ch. 22 - Nonfinancial performance measures Diamond Inc. is...Ch. 22 - Nonfinancial performance measures Alpha University...Ch. 22 - Direct materials and direct labor variance...Ch. 22 - Flexible budgeting and variance analysis I Love My...Ch. 22 - Direct materials, direct labor, and factory...Ch. 22 - Factory overhead cost variance report Tiger...Ch. 22 - Standards for nonmanufacturing expenses Code Head...Ch. 22 - Direct materials and direct labor variance...Ch. 22 - Flexible budgeting and variance analysis I'm...Ch. 22 - Direct materials, direct labor, and factory...Ch. 22 - Factory overhead cost variance report Feeling...Ch. 22 - Standards for nonmanufacturing expenses for a...Ch. 22 - Genuine Spice Inc. began operations on January 1,...Ch. 22 - Ethics in Action Dash Riprock is a cost analyst...Ch. 22 - Communication The senior management of Tungston...Ch. 22 - Variance interpretation You have been asked to...Ch. 22 - Variance interpretation Vanadium Audio Inc. is a...

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