(1)
Direct labor variances:
The difference between the actual labor cost in the production and the
- Labor rate variance.
- Labor time variance.
To determine: The direct labor time variance, if the department had typed 81,900 lines according to the original plan.
(1)
Explanation of Solution
Determine the direct labor time variance.
The direct labor time variance is $69 and it is an unfavorable variance, since the actual direct labor hour is more than the standard direct labor hour.
2.
The actual labor time variance, as a result of typing 88,900 lines.
2.
Explanation of Solution
Determine the direct labor time variance.
The direct labor time variance is $(161) and it is a favorable variance, since the actual direct labor hour is lesser than the standard direct labor hour.
3.
The direct labor rate variance as a result of the bonus.
3.
Explanation of Solution
Determine the direct labor rate variance.
The direct labor rate variance is $840 and it is an unfavorable variance, since the actual rate per hour is more than the standard rate per hour.
4.
The labor time variance in the first week if a new employee had been hired from the employment firm.
4.
Explanation of Solution
Determine the direct labor time variance.
The direct labor time variance is $759 and it is an unfavorable variance, since the actual direct labor hour is more than the standard direct labor hour.
5.
To identify: The better decision between paying the bonus, and hiring another transcriptionist.
5.
Answer to Problem 22.5BPR
Paying the bonus is the better decision when compared to hiring another transcriptionist as paying the bonus is less costly.
Explanation of Solution
Determine the total direct labor cost time variance.
The direct labor cost variance for paying the bonus is $679 (9) and it is an unfavorable variance, since the direct labor rate variance is more than the direct labor time variance. The labor cost variance in hiring another transcript would have been $759 (7) which is unfavorable, which is more than the cost of paying the bonus.
Hence, the net benefit of paying the bonus when compared to hiring another transcriptionist is $80
6.
To explain: The performance-related issues that the labor time, and rate variances fail to consider, if any.
6.
Explanation of Solution
The performance-related issues that the labor time and rate variances fail to consider are as follows:
- The number of errors in the report from the fatigue of the typist is failed to be considered by the labor time and rate variances. If a report has many errors, then it will require more time for correcting such errors at a later date.
- In addition to this, errors in the report may lead to draw incorrect conclusions by the doctors from the test analyses.
- Thus, the manager should consider the quality of the work also beside considering the efficiency of doing the work.
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Chapter 22 Solutions
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