Insurance company application The Farrell 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:
Simple claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 minutes
Complex claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 .5 hours
Employees were expected to be productive 7.5 hours per day. Compensation costs were $120 per day per employee. During November, which had 20 working days, the following number of claims were processed:
Simple claims . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600 processed
Complex claims . . . . . . . . . . . . . . . . . . . . . . . . 800 processed
Required:
a. Calculate the number of workers that should have been available to process November claims.
b. Assume that 22 workers were actually available throughout the month of November. Calculate a labor ef?ciency variance expressed as both a number of workers and a dollar amount for the month.