Problem 1

Adam Holmes is the Processing Manager of Empire Mortgage Company, a firm that processes loan applications for a number of regional builders. Home buying and therefore mortgage processing is a highly seasonal business, and requires temporary staff during busy processing periods. Holmes hires staff on a monthly basis from two different temporary staffing firms - Professional Temps (PT) and Support on Demand (SD). In June, Empire hired 14 staff members from PT and 10 from SD. PT is a more established firm and SD is a newly organized firm in the staffing market. Holmes has compiled the following information for June:

Budgets for June PT staff SD staff

Budgeted hourly rate $50 $45

Budgeted time per app. (hours) 1.2 1.4

Actual results for June PT staff SD staff

Actual hourly rate $52 $47

Actual time per app. (hours) 1.4 1.2

Number of actual apps completed 2,604 1,600

Questions:

1. Determine the labor rate and efficiency variances for (a) the 14 PT staff and (b) the 10 SD staff hired in June.
2. Comment on the efficiency of the PT and SD staff hired by Empire Mortgage.

Problem 2

Gunlock Chair Co. is an elite manufacturer of mid-century modern solid oak chairs. At the start of May, the following budgeted unit amounts related to its manufacture of these exclusive oak chairs:

• Direct materials: 8 square feet of oak per chair @ $35 per square foot
• Direct manufacturing labor: 3 hours per chair @ $40 per labor hour

Budgeted production for May was 1700 mid-century style chairs. There were no beginning inventories of direct materials or finished goods on May 1. Actual results for May are as follows:

• Direct materials purchased: 13,850 square feet for $493,060
• Direct materials used: 13,630 square feet
• Direct manufacturing labor: 5,425 hours at $42.00 per hour

Actual production in May is 1750 chairs.

Questions:

1. Compute the DM Purchase Price & Quantity variances for May

2. Compute the DL Rate and Efficiency variances for May