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:

Job	Standard Hours	Standard Rate	Standard Cost
Motor tune-up	1.50	$6.20	$9.30

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 230 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	318	F
Labor spending variance	$	829	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.)

     

Answer 1

Given Data
Standard Hours	345	230*1.5
Standard Rate	6.2
Actual Hours	???
Actual Rate	???

Computation of Labor Efficiency Variance

Labour Spending Variance = Labour rate variance + Labour Efficiency Variance

829 U = 318 F + Labour Efficiency Variance

Labour Efficency Variance = -829 -318

Labour Efficency Variance = -829 -318

Labour Efficency Variance = - 1147

Labour Efficency Variance = 1147 U

Answer to Part 1
Labor Efficiency Variance	Standard Rate *(Standard Hours - Actual hours)
1147 U	6.2*(345 - Actual Hours)
-1147	6.2*(345 - Actual Hours)
-1147/6.2	(345 - Actual Hours)
-185.00	(345 - Actual Hours)
Actual Hours	345+185
Actual Hours	530

Answer to Part 2
Labor Rate Variance		Actual Hours *(Standard Rate - Actual Rate)
Labor Rate Variance		Actual Hours *(Standard Rate - Actual Rate)
318 F		530 *(6.2 - Actual Rate)
318		530*(6.2 - Actual Rate)
318/530		6.2 - Actual Rate
0.6		6.2 - Actual Rate
Actual Rate		6.2-0.6
Actual Rate		5.60