Chapter 22 Evaluating Variances from Standard Costs PR 22-5B Standards for nonmanufacturing expenses for a service company Obj. 3,6 2. S(61) F The Radiology Department provides imaging services for Emergency Medical Center. One im- portant 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 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 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 planned. The overtim $30.00 per hour during the first week in May. temporary employees to be , the transcriptionists typed more lines in the first week of May than actual amount of lines typed in the first week of May was 88,900 lines, without e. As a result, the bonus caused the average transcriptionist hourly rate to increase to 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 tempo- rary 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 6Are there any performance-related issues that the labor time and rate variances fail to consider? Explain