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: 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: 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.)

Explanation / Answer

Labor spending variance (Standard hours for tuneups - Actual hours for tuneups) X Standard rate per hour Assuming the Actual hours for tuneups as 130X (130 *2.2 -130* X) * $ 12.10 = - $ 1,059 Thus, 1,573 X = $ 3,460.60 + $ 1,059 Hence, X = 2.873236 hours per tune up So, the actual number of hours worked for tune-ups during the week is 374 hours Labor Rate Variance (Standard rate per hour - Actual rate per hour) X Actual hours worked Assuming the actual rate per hour as X ($5.50 - X) * 374 = - $ 47 Thus, 374X = $ 2,057 + $47 = $ 2,104 Hence, X = 5.63 $ per hour

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