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In: Accounting

Direct Labor Standards for Nonmanufacturing Operations One of the operations in the Wonderland Post Office is...

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.
$

Solutions

Expert Solution

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

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