In: Accounting
Direct Labor Standards for Nonmanufacturing Operations
One of the operations in the Wonderland Post Office is a mechanical mail sorting operation. In this operation, letter mail is sorted at a rate of one letter per second. The letter is mechanically sorted from a three-digit code input by an operator sitting at a keyboard. The manager of the mechanical sorting operation wants to determine the number of temporary employees to hire for December. The manager estimates that there will be an additional 30,618,000 pieces of mail in December, due to the upcoming holiday season.
Assume that the sorting operators are temporary employees. The union contract requires that temporary employees be hired for one month at a time. Each temporary employee is hired to work 135 hours in the month.
a. How many temporary employees should the
manager hire for December?
employees
b. If each temporary employee earns a standard
$18 per hour, what would be the labor time variance if the actual
number of additional letters sorted in December was 29,700,000?
Enter a favorable variance as a negative number using a minus sign
and an unfavorable variance as a positive number.
$
a | Number of temporary employees to be hired in December | |||
Number of letter | 30,618,000 | |||
Number of hours required (30618000/3600 seconds) | 8,505 | |||
Number of employees required (8505/135) | 63 | |||
One letter require one second for sorting. There are 3600 seconds in an hour | ||||
(60 minutes x 60 seconds) | ||||
Each temporary employee can work 135 hours in a month, thus 63 employees | ||||
are needed. | ||||
b | Labor time variance | |||
Actual hours at standard cost | ||||
8250 hours x $18 per hour | 148,500 | |||
Standard cost (standard hour x standard rate) | ||||
8505 hours x $18 per hour | 153,090 | |||
Variance (Actual - Standard) | -4,590 |