(1)
Direct labor variances:
The difference between the actual labor cost in the production and the
- Labor rate variance.
- Labor time variance.
To determine: The direct labor time variance, if the department had typed 81,900 lines according to the original plan.
(1)
Explanation of Solution
Determine the direct labor time variance.
The direct labor time variance is $69 and it is an unfavorable variance, since the actual direct labor hour is more than the standard direct labor hour.
2.
The actual labor time variance, as a result of typing 88,900 lines.
2.
Explanation of Solution
Determine the direct labor time variance.
The direct labor time variance is $(161) and it is a favorable variance, since the actual direct labor hour is lesser than the standard direct labor hour.
3.
The direct labor rate variance as a result of the bonus.
3.
Explanation of Solution
Determine the direct labor rate variance.
The direct labor rate variance is $840 and it is an unfavorable variance, since the actual rate per hour is more than the standard rate per hour.
4.
The labor time variance in the first week if a new employee had been hired from the employment firm.
4.
Explanation of Solution
Determine the direct labor time variance.
The direct labor time variance is $759 and it is an unfavorable variance, since the actual direct labor hour is more than the standard direct labor hour.
5.
To identify: The better decision between paying the bonus, and hiring another transcriptionist.
5.
Answer to Problem 22.5BPR
Paying the bonus is the better decision when compared to hiring another transcriptionist as paying the bonus is less costly.
Explanation of Solution
Determine the total direct labor cost time variance.
The direct labor cost variance for paying the bonus is $679 (9) and it is an unfavorable variance, since the direct labor rate variance is more than the direct labor time variance. The labor cost variance in hiring another transcript would have been $759 (7) which is unfavorable, which is more than the cost of paying the bonus.
Hence, the net benefit of paying the bonus when compared to hiring another transcriptionist is $80
6.
To explain: The performance-related issues that the labor time, and rate variances fail to consider, if any.
6.
Explanation of Solution
The performance-related issues that the labor time and rate variances fail to consider are as follows:
- The number of errors in the report from the fatigue of the typist is failed to be considered by the labor time and rate variances. If a report has many errors, then it will require more time for correcting such errors at a later date.
- In addition to this, errors in the report may lead to draw incorrect conclusions by the doctors from the test analyses.
- Thus, the manager should consider the quality of the work also beside considering the efficiency of doing the work.
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Chapter 22 Solutions
FINANCIAL & MANAGERIAL ACCT LOOSE LEAF
- Standards for nonmanufacturing expenses The Radiology Department provides imaging services for Northeast Washington Medical Center. One important activity in the Radiology Department is transcribing digitally recorded analyses of images into a written report. The manager of the Radiology Department determined that the average transcriptionist could type 800 lines of a report in an hour. The plan for the first week in July called for 64,000 typed lines to be written. The Radiology Department has two transcriptionists. Each transcriptionist is hired from an employment firm (hat requires temporary employees to be hired for a minimum of a 40-hour week. Transcriptionists are paid $18.00 per hour. The manager offered a bonus if the department could type more than 70,000 lines for the week, without overtime. Due to high service demands, the transcriptionists typed more lines in the first week of July than planned. The actual amount of lines typed in (he first week of July was 70,400 lines, without overtime. As a result, the bonus caused the average transcriptionist hourly rate to increase to $20.00 per hour during the first week in July. Instructions Are there any performance-related issues that the labor time and rate variances fail to consider? Explain.arrow_forwardAlard Manufacturing Company has a billing department staffed by four billing clerks. Each clerk is paid 32,000 per year and is able to process 8,000 bills. Last year, 27,360 bills were processed by the four agents. Calculate the unused capacity in terms of number of bills. a. 27,360 b. 4,640 c. 8,000 d. 32,000arrow_forwardCodeHead Software Inc. does software development. One important activity in software development is writing software code. The manager of the WordPro Development Team determined that the average software programmer could write 25 lines of code in an hour. The plan for the first week in May called for 4,650 lines of code to be written on the WordPro product. The WordPro Team has five programmers. Each programmer is hired from an employment firm that requires temporary employees to be hired for a minimum of a 40-hour week. Programmers are paid 32.00 per hour. The manager offered a bonus if the team could generate more lines for the week, without overtime. Due to a project emergency, the programmers wrote more code in the first week of May than planned. The actual amount of code written in the first week of May was 5,650 lines, without overtime. As a result, the bonus caused the average programmers hourly rate to increase to 40.00 per hour during the first week in May. Instructions 1. If the team generated 4,650 lines of code according to the original plan, what would have been the labor time variance? 2. What was the actual labor time variance as a result of generating 5,650 lines of code? 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 programmer to meet the higher programming demand 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 programmer?arrow_forward
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The reports revealed the following: Jamarcus was concerned about the increased cost per ton from the output of the department. As a result, he asked the plant controller to perform a study to help explain these results. The controller, Leann Brunswick, began the analysis by performing some interviews of key plant personnel in order to understand what the problem might be. Excerpts from an interview with Len Tyson, a paper machine operator, follow: Len: We have two papermaking machines in the department. I have no data, but I think paper machine No. 1 is applying too much pulp and, thus, is wasting both conversion and materials resources. We haven't had repairs on paper machine No. 1 in a while. Maybe this is the problem. Leann: How does too much pulp result in wasted resources? Len: Well, you see, if too much pulp is applied, then we will waste pulp material. The customer will not pay for the extra product; we just use more material to make the product. Also, when there is too much pulp, the machine must be slowed down in order to complete the drying process. This results in additional conversion costs. Leann: Do you have any other suspicions? Len: Well, as you know, we have two productsgreen paper and yellow paper. They are identical except for the color. The color is added to the papermaking process in the paper machine. I think that during August these two color papers have been behaving very differently. I don't have any data, but it just seems as though the amount of waste associated with the green paper has increased. Leann: Why is this? Len: I understand that there has been a change in specifications for the green paper, starting near the beginning of August. This change could be causing the machines to run poorly when making green paper. If this is the case, the cost per ton would increase for green paper. Leann also asked for a database printout providing greater detail on Augusts operating results. September 9 Requested by: Leann Brunswick Papermaking DepartmentAugust detail Prior to preparing a report, Leann resigned from Georgia Paper Company to start her own business. You have been asked to take the data that Leann collected, and write a memo to Jamarcus Bradshaw with a recommendation to management. Your memo should include analysis of the August data to determine whether the paper machine or the paper color explains the increase in the unit cost from July. Include any supporting schedules that are appropriate. Round any calculations to the nearest cent.arrow_forwardGreiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiners master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employers share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the companys union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 5,600 glare filters in inventory on December 31 of the current year, and has a policy of carrying 35 percent of the following month's projected sales in inventory. Information on the first four months of the coming year is as follows: Required: 1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year. Be sure to show supporting calculations. a. Production budget in units b. Direct labor budget in hours c. Direct materials cost budget d. Sales budget 2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. Be sure to show supporting calculations. (CMA adapted)arrow_forward
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