The auto repair shop of Quality Motor Company uses standards to control the labo

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 hours: 1.5 Standard Rate: 6.00 Standard Cost: 9.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 150 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance: 306 F Labor Spending variance: 1404 U

1. Determine the actual number of hours spend on tune ups in the week

2. Determine the actual hourly rate of pay for the tune ups

Explanation / Answer

Labor efficiency variance = 1404+306= 1710 U 1 Labor efficiency variance = SR*(AH-SH) 1710 = 6*(Ah-150*1.5) 285 = AH-225 AH = 285+225= 510 hours Actual number of hours = 510 2 Labor rate variance = AH*(SR-AR) 306 = 510*(6-AR) 0.6 = 6-AR AR = 5.4 Actual hourly rate of pay = $5.4

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