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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Direct labor standards for nonmanufacturing expenses

 Englert Hospital began using standards to evaluate its Admissions Department. The standard was broken into two types of admissions as follows:

Type of Admission Standard Time to Complete Admission Record
Unscheduled admission 30 min.
Scheduled admission 15 min.

 The unscheduled admission took longer because name, address, and insurance information needed to be determined and verified at the time of admission. Information was collected on scheduled admissions prior to the admissions, which was less time-consuming.

 The Admissions Department employs four full-time people (40 productive hours per week, with no overtime) at $15 per hour. For the most recent week, the department handled 140 unscheduled and 350 scheduled admissions.

 a.    How much was actually spent on labor for the week?

 b.    What are the standard hours for the actual volume for the week?

 c.    Calculate a time variance and report how well the department performed for the week.

a.

To determine

Direct labor variances:

The difference between the actual labor cost in the production and the standard labor cost for actual production is known as direct labor cost variance. The direct labor variance can be classified as follows:

  • Labor rate variance.
  • Labor time variance.

To identify: The amount actually spent on labor for the week.

Explanation

Calculate the actual amount spent on labor for the week.

Actual weekly expenditure = (Number of people×Rate per hour×Hours per week

b.

To determine

Calculate the standard hours for the actual volume for the week.

c.

To determine

Calculate the direct labor time variance.

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