Problem 15.21LO 4, 5

Direct labor variances - insurance company application 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.