The Foster Insurance Company developed standard times for processing claims. When a claim was received at the
Question:
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 minutes
Complex claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.25 hours
Employees were expected to be productive 7.5 hours per day. Compensation costs were $135 per day per employee. During July, which had 20 working days, the following number of claims were processed:
Simple claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 processed
Complex claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . 960 processed
Required:
a. Calculate the number of workers that should have been available to process July claims.
b. Assume that 23 workers were actually available throughout the month of July.
Calculate a labor efficiency variance expressed as both a number of workers and a dollar amount for the month.
Step by Step Answer:
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,