Exercise 23-4 Monte Services, Inc. is trying to establish the standard labor cos

Question

Exercise 23-4 Monte Services, Inc. is trying to establish the standard labor cost of a typical oil change. The following data have been collected from time and motion studies conducted over the past month. Actual time spent on the oil change Hourly wage rate Payroll taxes Setup and downtime Cleanup and rest periods Fringe benefits 3.00 hour $12 16% of wage rate 7% of actual labor time 33% of actual labor time 25% of wage rate Determine the standard direct labor hours per oil change. (Round answer to 2 decimal places, e.g. 1.25.) Standard direct labor hours per cil change hours LINK TO TEXT LINK TO TEXT Determine the standard direct labor hourly rate. (Round answer to 2 decimal places, e.0. 1.25) Standard direct labor hourly rate LTNK TO TEXT LINK TO TEXT Determine the standard direct labor cost per oil change. (Round answer to 2 decimal places, e.g. 1.25.) Standard direct labor cost per oil change LINK TO TEXT LINK TO TEXT If an oil change took 3.6 hours at the standard hourly rate, what was the direct labor quantity variance? (Round answer to 2 decimal places, e.g. 1.25.) Direct labor quantity variance Click if you would like to Show Work for this question: Qpen Show Work

Explanation / Answer

1 Standard direct labor hours per oil change = 4.20 hours 2 Standard direct labor hourly rate = $16.92 3 Standard Direct Labor cost per oil change = $71.06 4 Direct labor quantity variance = $20.30 Favorable Workings: 1 Standard direct labor hours per oil change = Actual time spent on the oil change + set up and downtime + clean up and rest periods = 3 + ( 3 X 7%) + ( 3 X 33%) = 3 + 0.21 + 0.99 = 4.20 hours 2 Standard direct labor hourly rate = Hourly wage rate + payroll taxes + Fringe benefits = $12 + ( $12 X 16%) + ( $12 X 25%) = $12 + $1.92 + $3 = $16.92 3 Standard Direct Labor cost per oil change = 4.20 hours X $16.92 = $71.06 4 Direct labor quantity variance = Standard rate X (Actual hours - Standard hours allowed for oil change) = $16.92 X ( 3 hours - 4.20 hours) = $20.30 Favorable

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