The Worldwide Credit Card, Inc., uses standards to control the labor time involv

Question

The Worldwide Credit Card, Inc., uses standards to control the labor time involved in opening mail from card holders and recording the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opening and recording each batch. The labor standards relating to one batch are as follows:

Per Batch- Standard Hours 2.50... Standard Rate $4.50.. Standard Cost $11.25

The record showing the time spent last week in opening batches of mail has been misplaced. However, the batch supervisor recalls that 160 batches were received and opened during the week, and the controller recalls the following variance data relating to these batches:

Total Labor Spending Variance: $546 U
Labor Rate Variance: $51 U

1. Determine the number of actual labor-hours spent opening batches during the week.
2. Determine the actual hourly rate paid to employees for opening batches last week. (round your answers to 2 decimal places)

Explanation / Answer

1) Labor efficiency variance + Labor rate variance = Total labor spending variance

since Labor efficiency variance = SR(AH - SH), we are given the other two values therefore we get the following

SR(AH - SH) + 51 = 546 which after plugging in the given standard known values becomes

4.5(AH - (160*2.5)) = 495

AH = 510 hrs

2) Labor rate variance = AH(AR-SR) which is equal to 51 (given)

510(AR - 4.5) = 51

AR = $4.60

The above answer is correct but this way is how I do it which involves less equation manipulation and seems somewhat easier to follow

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