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One of the operations in the U.S. Post Office is a mechanical mail sorting operation. In this operation, letter mail is sorted at a rate of one letter per second. The letter is mechanically sorted from a three-digit code input by an operator sitting at a keyboard. The manager of the mechanical sorting operation wishes to determine the number of temporary employees to hire for December. The manager estimates that there will be an additional \(31,104,000\) pieces of mail in December, due to the upcoming holiday season. Assume that the sorting operators are temporary employees. The union contract requires that temporary employees be hired for one month at a time. Each temporary employee is hired to work 160 hours in the month. a. How many temporary employees should the manager hire for December? b. If each employee earns a standard \(\$ 18\) per hour, what would be the labor time variance if there were \(31,320,000\) additional letters sorted in December?

Step by step solution

01

Calculate Total Sorting Time Required

Each letter takes 1 second to sort, and there are 31,104,000 letters in December. So, total sorting time is 31,104,000 seconds. To convert this to hours, divide by 3600 (since there are 3600 seconds in an hour). \[ \text{Total hours needed} = \frac{31,104,000}{3600} = 8640 \text{ hours} \]

02

Calculate Number of Employees Required

Each temporary employee works 160 hours in a month. To determine the number of employees required, divide the total hours needed by the hours each employee works.\[ \text{Number of employees} = \frac{8640}{160} = 54 \text{ employees} \]

03

Calculate Actual Sorting Time for Variance

The manager finds out that instead of 31,104,000 letters, 31,320,000 letters were sorted. Recalculate the total sorting time in hours as before:\[ \text{Total hours actual} = \frac{31,320,000}{3600} = 8700 \text{ hours} \]

04

Calculate Labor Time Variance

Labor time variance is the difference between the actual hours worked and the planned hours. Multiply this variance by the rate per hour to find the value of the variance.\[ \text{Variance in hours} = 8700 - 8640 = 60 \text{ hours} \]\[ \text{Labor time variance cost} = 60 \times 18 = \$1080 \]

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Mechanical Mail Sorting

Mechanical mail sorting is a system used by postal services to sort vast quantities of letters quickly and efficiently. Instead of manually sorting mail, machines sort letters based on a code entered by an operator. This speeds up the entire process significantly.
For the U.S. Post Office, each letter takes precisely 1 second to sort. The machine works so fast because it can rapidly process codes corresponding to different mail routes or delivery points.
A well-organized mechanical mail sorting system is crucial, especially during busy periods like the holidays when mail volume increases drastically. By automating the sorting process, the Post Office can handle a larger volume of mail compared to manual sorting, thus meeting delivery deadlines and keeping customers happy.

Labor Time Variance

Labor time variance is an important concept in cost accounting that evaluates the difference between expected labor costs and actual labor costs incurred. In the context of mechanical mail sorting, this can be seen when comparing the planned hours to the actual hours worked. For example, if you expect employees to sort a certain number of letters in a set amount of time but end up sorting more, this results in a variance.
It's calculated as follows:

• Determine the difference in the actual sorted letters versus the estimated sorted letters.
• Convert this difference into hours by considering the time each letter takes (1 second per letter).
• Subtract the planned hours from the actual hours to get the variance in hours.
• Multiply the variance in hours by the cost per hour to get the labor time variance in currency terms.

By understanding and calculating labor time variance, managers can better plan their workforce, control labor costs, and allocate resources more efficiently.

Employee Scheduling

Employee scheduling involves planning the assignment of staff to different tasks or shifts to meet the demand for work at any given time. In the scenario of temporary employees at the postal service, determining the correct number of staff to hire is crucial to ensure that all mail is sorted efficiently.
Effective employee scheduling considers factors such as:

• The volume of mail to be handled during peak periods like holidays.
• The number of hours each temporary employee is expected to work (160 hours in December).
• Union agreements or contracts regarding work shifts.

By accurately forecasting demand and schedule employees accordingly, the Post Office can ensure operational efficiency and smooth mail sorting operations during busy times.

Holiday Workforce Planning

Holiday workforce planning is all about preparing staffing for expected increases in demand. The holiday season typically means a surge in mail volume, requiring additional temporary employees.
The key steps in holiday workforce planning include:

• Estimating the expected mail volume, using past data and seasonal trends.
• Calculating the number of hours needed to process the additional mail.
• Determining the number of temporary employees required to handle the increased workload.
• Ensuring compliance with union contracts, such as hiring for full months.

By planning for the holidays, the Postal Service can effectively manage increased volumes without delays or service disruptions, thereby ensuring customer satisfaction and maintaining a smooth operation.