Question

The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below:

a. Standard Hours b.Standard Rate c. Standard Cost Motor tune-up

a. 12.60 b. $4.00 c. $10.40

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 180 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance $ 714 U

Labor spending variance $ 882 U

Required:1. Determine the number of actual labor-hours spent on tune-ups during the week.

2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.)

I keep coming up with 867 for #1 and can't figure out where i'm going wrong.

Answer 1

Standard labor hours allowed = Actual tune-ups * Standard labor hours per tune-up
Standard labor hours allowed = 180 * 12.60
Standard labor hours allowed = 2,268

Standard labor cost = Standard rate per hour * Standard labor hours allowed
Standard labor cost = $4.00 * 2,268
Standard labor cost = $9,072

Labor spending variance = Labor rate variance + Labor efficiency variance
$882 Unfavorable = $714 Unfavorable + Labor efficiency variance
Labor efficiency variance = $168 Unfavorable

Answer 1.

Labor efficiency variance = Actual labor hours * Standard rate per hour - Standard labor cost
$168 = Actual labor hours * $4.00 - $9,072
$9,240 = Actual labor hours * $4.00
Actual labor hours = 2,310

Answer 2.

Labor rate variance = Actual labor hours * (Actual rate per hour - Standard rate per hour)
$714 = 2,310 * (Actual rate per hour - $4.00)
$0.31 = Actual rate per hour - $4.00
Actual rate per hour = $4.31