P11-11 See pg 421 for formula and example. Northwest Medical Testing Clients per
ID: 2582867 • Letter: P
Question
P11-11 See pg 421 for formula and example. Northwest Medical Testing Clients per month 1500 clients Std time for blood sample 20 minutes Std wage for Technician $40.00 per hour Total August activity Clients in month 1250 clients Time for blood samples 425 hours Tech total wages $22,100 for month a. Calculate the labor rate variance for August. Indicate if favorable or unfavorable. (AR - SR) AH b. Calculate the labor efficiency variance for August. Indicate if favorable or unfavorable. (AH - SH) SR c. Given the following analysis .... Although the labor rate variance is relatively large, its cause is fairly obvious. It is not surprising that the company would need to pay a relatively high wage rate to a temporary worker with the skills to draw and prepare blood samples. As only 425 hours of work were performed in the month, it appears that the lab had only two full-time employees. Based on $60 per hour for one of them and $40 per hour for the other, and assuming that each worked an equal number of hours, the expected total cost at an average rate of $50 [($60 + 40) ÷2] is $21,250. Do labor costs for technicians apprear to be out of line (out of control), or reasonable given the need to hire a temp.? P11-11 See pg 421 for formula and example. Northwest Medical Testing Clients per month 1500 clients Std time for blood sample 20 minutes Std wage for Technician $40.00 per hour Total August activity Clients in month 1250 clients Time for blood samples 425 hours Tech total wages $22,100 for month a. Calculate the labor rate variance for August. Indicate if favorable or unfavorable. (AR - SR) AH b. Calculate the labor efficiency variance for August. Indicate if favorable or unfavorable. (AH - SH) SR c. Given the following analysis .... Although the labor rate variance is relatively large, its cause is fairly obvious. It is not surprising that the company would need to pay a relatively high wage rate to a temporary worker with the skills to draw and prepare blood samples. As only 425 hours of work were performed in the month, it appears that the lab had only two full-time employees. Based on $60 per hour for one of them and $40 per hour for the other, and assuming that each worked an equal number of hours, the expected total cost at an average rate of $50 [($60 + 40) ÷2] is $21,250. Do labor costs for technicians apprear to be out of line (out of control), or reasonable given the need to hire a temp.?Explanation / Answer
a. Actual hours = 425 hours
Actual Wages = $22100
Standard Hours = 1500 clients * 20 mins each = 500 hours
Standard Wages = 500*40 =$20000
Labor rate variance = (AR - SR) AH
=(22100/425-40)*425 = $5100 Unfavorable
b.Labor Efficiency Variance = Standard Cost of Actual Hours - Standard Cost = (AH - SH) SR
=(425-1250*20/60)*40
=333.33 Unfavourable
c. An adverse labor efficiency variance suggests lower productivity of the Lab technicians during Aug compared with the standard. The Lab technicians wages seem to be reasonable and it seems that the adverse result is on account of higher Idle time incurred than estimated, lower productivity or may be even on account of the technicains not being very skilled.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.