Direct labor variances-insurance company application The Foster Insurance Company developed standard times for processing claims. When a claim was received at the processing center, it was first reviewed and classified as simple or complex. The standard time for processing was:
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Simple claim
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36 minutes
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Complex claim
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1.25 hours
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Employees were expected to be productive 7.5 hours per day. Compensation costs were $135 per day per employee. During July, which had 20 working days, the following number of claims were processed:
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Simple claims
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3,000 processed
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Complex claims
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960 processed
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Required:
a. Calculate the number of workers that should have been available to process July claims.
b. Assume that 23 workers were actually available throughout the month of July.
Calculate a labor efficiency variance expressed as both a number of workers and a dollar amount for the month.