Problem 11 - Accounting

Question

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 \(32,400,000\) 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 150 hours in the month. a. How many temporary employees should the manager hire for December? b. If each employee earns a standard \(\$ 16\) per hour, what would be the labor time variance if the actual number of letters sorted in December was \(32,814,000\) ?

Step-by-Step Solution

Answer

The manager should hire 60 temporary employees. The labor time variance is $1,840.

Step 1: Calculate Total Required Sorting Hours

First, determine the total number of hours needed to sort the additional 32,400,000 pieces of mail. Since each letter is sorted at a rate of one per second, the required sorting time in seconds is equal to the number of pieces of mail: 32,400,000. Convert this into hours by dividing by 3600 (the number of seconds in an hour):\[\text{Total hours} = \frac{32,400,000}{3600} = 9,000 \text{ hours}\]

Step 2: Determine Employees Required

Each temporary employee works 150 hours in the month. To find the number of employees needed, divide the total required sorting hours by the number of hours each employee works:\[\text{Number of Employees} = \frac{9,000 \text{ hours}}{150 \text{ hours/employee}} = 60\]

Step 3: Calculate Actual Sorting Hours for Variance

Determine the actual number of hours required based on the actual number of letters sorted (32,814,000). Convert this into hours:\[\text{Actual hours} = \frac{32,814,000}{3600} = 9,115 \text{ hours}\]

Step 4: Calculate Cost of Actual Hours Worked

Calculate the total labor cost for the actual hours worked at a rate of \(16 per hour:\[\text{Actual labor cost} = 9,115 \text{ hours} \times 16 \\)/\text{hour} = 145,840 \$\]

Step 5: Calculate Cost of Planned Hours Worked

Calculate the expected labor cost for the originally planned 9,000 hours:\[\text{Planned labor cost} = 9,000 \text{ hours} \times 16 \\(/\text{hour} = 144,000 \\)\]

Step 6: Calculate Labor Time Variance

Subtract the planned labor cost from the actual labor cost to find the labor time variance:\[\text{Labor time variance} = 145,840 \\( - 144,000 \\) = 1,840 \$\]

Key Concepts

Temporary Employees

Temporary employees play a vital role in handling short-term spikes in workload. In the context of the U.S. Post Office during the holiday season, these employees are essential for managing the increased volume of mail. Temporary workers, as opposed to permanent employees, are hired for a specific, limited duration, usually to meet temporary increases in demand.
Hiring temporary employees is beneficial because it allows organizations to be flexible and responsive without the long-term commitment of hiring permanent staff. Typically, these employees are hired on a month-to-month basis, which aligns perfectly with seasonal spikes like those experienced during December for postal services.
- Flexibility in hiring
- Cost-effective for short-term needs
- Allows for quick scalability
This makes temporary staffing an effective staffing strategy during predictable periods of increased workload.

Mechanical Mail Sorting

Mechanical mail sorting refers to the use of machines to sort letters and parcels, speeding up the process significantly compared to manual sorting methods. At the U.S. Post Office, mechanical mail sorting involves the use of machines that can handle large volumes of mail efficiently, sorting each letter at a rate of one per second based on a three-digit code.
The operator inputs this code, and the machine assigns the mail to the correct destination. This process promotes high efficiency and accuracy, ensuring that millions of pieces of mail can be handled each day.
Advantages of mechanical sorting include:
- Increased sorting speed
- Improved accuracy
- Reduced need for manual labor
By relying on mechanical sorting, organizations streamline operations, especially during peak mailing periods.

Union Contract

Union contracts are legally binding agreements between labor unions and employers, setting the terms for employment, such as wages, working conditions, and workplace rules. In the case of the U.S. Post Office, the union contract stipulates details such as the conditions under which temporary employees are hired.
These contracts can significantly impact staffing and operational decisions. For temporary employees, the post office is required to hire them for a full month, impacting how the organization plans for and manages its staffing levels.
Key aspects of union contracts might cover:
- Employment duration requirements
- Minimum wage and benefits
- Overtime and working hours
Understanding these contractual obligations ensures that employers comply with legal requirements while planning their workforce effectively.

Sorting Operation Efficiency

Sorting operation efficiency refers to how effectively an organization handles the sorting of mail, determining the cost and speed of mail processing. Efficient operations maximize the throughput of the sorting process while minimizing costs and errors. At the U.S. Post Office, achieving high sorting operation efficiency is crucial during busy periods, such as the holiday season.
There are several factors that influence sorting operation efficiency:
- Utilization of advanced sorting technology and equipment
- Proper staffing levels, including the use of temporary employees as needed
- Optimization of processes to reduce bottlenecks
Efficiency impacts both operational costs and customer satisfaction. Optimizing these processes involves strategic planning and continual refinement of practices to accommodate fluctuating demand.
By maintaining high sorting operation efficiency, postal services ensure timely deliveries and handle increased volumes without compromising service quality.