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 Standard Cost Standard Hours 2.10 Standard Job Motor tune-up Rate $6.50 $13.65 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 140 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: $459 $945 Labor rate variance Labor spending variance Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week. hours Actual labor hours 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.) Actual hourly rate per hour

Answer 1

Labor Spending variance = Budgeted(Standard) Labor Cost - Actual Labor Cost

                  $945 U   = (Standard Rate * Tune-Ups Completed) - Actual Labor Cost

                      ($945) = ($13.65 * 140) - Actual Labor Cost

                        ($945)   = $1,911 - Actual Labor Cost

      Actual Labor Cost = $1,911+$945

                                    = $2,856

1. Actual Labor Hours Spent on Tune- Ups during the week

    Labor Rate Variance = (Standard Rate * Actual Labors Hours Worked) - (Actual Rate * Actual Labors Hours Worked)

                       $459 F = ($6.5 * Actual Labors Hours Worked) - Actual Labor Cost

                       $459     = ($6.5 * Actual Labors Hours Worked) - $2,856

             $459 + $2,856 = $6.5 * Actual Labors Hours Worked

                       $3,315 = $6.5 * Actual Labors Hours Worked

Actual Labors Hours Worked = $3,315/ $6.

                                           = 510 Hours

2. Actual Hourly Rate for Tune-Ups during Last week

      Actual Labor Cost = Actual Labors Hours Worked * Actual Labor Rate

                     $2,856 =   510 Hours * Actual Labor Rate

     Actual Labor Rate =    $2,856 / 510 hours

                                  = $5.6