Work Measurement The Hayward Company has installed a work-measure- ment program for its billing operations. A standard billing cost of $.50 per bill has been used, based on hourly labor rates of $4.00 and an average processing rate of 8 bills of 10 lines each per hour. Each clerk has a 7/-hour workday and a 5-day workweek.

The supervisor has received the following report of performance from his superior—the office manager, Mr. Davis—for a recent 4-week period regard- ing his clerks:

VARIANCE EQUIVALENT ACTUAL BUDGET AMOUNT PERSONS Billing labor (5 clerks) $3,000 $1,850 $1,150 U 1.9 (3,700 bills X $.50)
The supervisor knows that he must explain the unfavorable variance and offer suggestions regarding how to avoid such an unfavorable variance in the future. Because of a recession, the office manager is under severe pressure to cut staff. In fact, he had penciled a question on the report: “Looks as if we can get along with two less clerks?”
Anticipating the pressures, the supervisor had taken a random sample of 400 of the 3,700 bills that were prepared during the period under review. His count of the lines in the sample totaled 5,200.
As the supervisor, prepare a one-page explanation of the $1,150 unfavorable variance, together with your remedial suggestions. lop8