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Question: Variance analysis, nonmanufacturing setting. Joyce Brown has run Medical Maids, a specialty cleaning service for medical and dental offices, for the past 10 years. Her static budget and actual results for April 2017 are shown below. Joyce has one employee who has been with her for all 10 years that she has been in business. In addition, at any given time she also employs two other less-experienced workers. It usually takes each employee 2 hours to clean an office, regardless of his or her experience. Brown pays her experienced employee $30 per office and the other two employees $15 per office. There were no wage increases in April.
1. How many offices, on average, did Brown budget for each employee? How many offices did each employee actually clean?
2. Prepare a flexible budget for April 2017.
3. Compute the sales price variance and the labor efficiency variance for each labor type.
4. What information, in addition to that provided in the income statements, would you want Brown to gather, if you wanted to improve operational efficiency?
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