Purchase Solution

# Labor Variances and Accounting for Decision Making & Control

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12-15: Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotel purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees along with the small crew of Great Southern Employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture.
The 500 room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated costs per our is \$22. Upon completing the job, the crew reports they had total wages of \$49,693 for 2,170 hours worked.
Required: Write a report evaluating the performance of the crew at the Hyatt in Tampa.

##### Solution Summary

Computations needed plus a 123 word report evaluating the performance (interpreting the labor variance).

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