2 Check The auto repair shop of Quality Motor Company uses standards to control

Question

2
Check 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 Standa Hours 2.20 Rate $5.50 Cost $12.10 Motor tune-up The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 130 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups Labor rate variance Labor apending variance 255 F 977 tU 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) 1 Actual labor hours 2 Actual hourly rate hours per hour

Explanation / Answer

a. 1. Actual Labour Hours

Direct Labor Spending variance = (Standard Hours - Actual Hours) * Standard Rate

-$977 = (130 * 2.20 - Actual Hours) * $5.50

-$177.64 = (130 * 2.20 - Actual Hours)

Actual Hours = 463.64 Hours

a.2 Actual Hourly Rate

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

$255 = ($5.50 - Actual Rate) * 463.64

Actual Rate = $5.50 - $0.55

Actual Hourly Rate = $4.95

b.1

Material Price Variance = (SP ? AP ) × AQ

SP is the standard unit price of direct material

AP is the actual price per unit of direct material
AQ is the actual quantity of direct material used

Material Price Variance = ($2.30 ? 2.10 ) × 25900

Material Price Variance = $5180 Favorable

SQ is the standard quantity allowed
   AQ is the actual quantity of direct material used
   SP is the standard price per unit of direct material

DM Quantity Variance = ( 7.80 * 3000 ? 25900 ) × $2.30

DM Quantity Variance = ( 23400 ? 25900 ) × $2.30

DM Quantity Variance = $5750 Unfavorable

b2.

Where,
   SR is the standard direct labor rate
   AR is the actual direct labor rate
   AH are the actual direct labor hours

DL Rate Variance = $8 * 700 ? $6300

DL Rate Variance = $700 Unfavorable

Where,
   SH are the standard direct labor hours allowed
   AH are the actual direct labor hours used
   SR is the standard direct labor rate per hour

DL Efficiency Variance = ( 3000 * 0.30 ? 700 ) × 8

DL Efficiency Variance = $1600 Favorable

DM Quantity Variance = ( SQ ? AQ ) × SP

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