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:

Job Standard Hours, Standard Rate, Standard Cost Motor tune-up

2.60 $4.00 $10.40

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 180 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance $ 188 U

Labor spending variance $ 196 U

Required:

1. Determine the actual labor hours spent on tune ups during the week

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

Explanation / Answer

Answer:

Completed Tune-ups during the week = 180

Standard Time for actual production = 180 tune-ups actually completed x Standard Time per tune-up = 180 x 2.60 = 468 Hours

Labor Spending Variance = (Standard Time for actual production x Standard Rate) – (Actual Time x Actual Rate) = $196 U

(Standard Time for actual production x Standard Rate) – (Actual Time x Actual Rate) = $196 U

(468 x $4) – (Actual Time x Actual Rate) = $196U

$1,872 – (Actual Time x Actual Rate) = $196U

Actual Time x Actual Rate = $2,068 --------------equation (i)

Labor Rate Variance = Actual Time (Standard Rate – Actual Rate) = $188U

Actual Time x Standard Rate – Actual Time x Actual Rate = $188U

By putting the value of actual time x actual rate = $2,068 from equation (i)

(Actual Time x $4) - $2,068 = $188U

Actual Time x $4 = -$188 + $2,068

Actual Time x $4 = $1,880

Actual Time = $1,880 / $4 = 470 Hours

By putting Actual Time = 470 Hours in equation (i) we get,

470 x Actual Rate = $2,068

Actual Rate = $2,068 / 470 = $4.40

Hence the answer will be as follows:

1. Actual labor hours spent on tune ups during the week = 470 Hours

2. Actual hourly rate of pay for tune-ups last week = $4.40 Per Hour

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.