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inessss [21]
3 years ago
6

Adam Holmes is the Processing Manager of Empire Mortgage Company, a firm that processes loan applications for a number of region

al builders. Home buying and therefore mortgage processing is a highly seasonal business, and requires temporary staff during busy processing periods. Holmes hires staff on a monthly basis from two different temporary staffing firms - Professional Temps (PT) and Support on Demand (SD). In June, Empire hired 14 staff members from PT and 10 from SD. PT is a more established firm and SD is a newly organized firm in the staffing market. Holmes has compiled the following information for June:
Budgets for June PT staff SD staff
Budgeted hourly rate $50 $45
Budgeted time per app. (hours) 1.2 1.4

Actual results for June PT staff SD staff
Actual hourly rate $52 $47
Actual time per app. (hours) 1.4 1.2
Number of actual apps completed 2604 1600

Required:
a. Determine the labor rate and efficiency variances for (a) 14 PT staff and (b) the SD staff hired in June.
b. Comment on the efficiency of the PT and SD staff hired by Empire Mortgage.
Business
1 answer:
Elina [12.6K]3 years ago
5 0

Answer:

a. <u>Labor variances for 14 PT staff: </u>

Labor rate variance = (Standard Rate – Actual Rate) x (Actual time per app) * (number of apps. completed)

= ($50 - $52) x 1.40 x 2,604

= $7291.20 (Unfavorable)

Labor Efficiency variance = [(Standard hours per app. X number of app.) - (Actual time per App. * number of apps.)] * Std. rate

= [(1.20 * 2,604) - (1.40 * 2,604)] * $50

= [3,124.80 - 3,645.60] * $50

= $26,040 (Unfavorable)

Labor Cost variance = Labor rate variance + Labor efficiency variance

= $7,291.20 (Unfavorable) + $ 26,040 (Unfavorable)

= $33,331.20 (Unfavorable)

<u>Labor variances for 10 SD staff</u>:

Labor rate variance = (Standard Rate – Actual Rate) x (Actual time per app) * (number of apps. completed)

= ($45 - $47) * 1.20 * 1,600

= $3840 (Unfavorable)

Labor Efficiency variance = [(Standard hours per app. X number of app.) - (Actual time per App. * number of apps.)] * Std. rate

= (1.40*1,600) – (1.20*1,600)]*$45

= [2,240 – 1,920] * $45

= $14,400 (Favorable)

Labor Cost variance = Labor rate variance + Labor efficiency variance

= $3,840 (Unfavorable) + $ 14,400 (Favorable)  

= $10,560 (Favorable)

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