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 210 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.

Explanation / Answer

Particulars Standard Actual Hours Rate amount Hours Rate amount Labour                  420.00                  6.4000              2,688.00                  490.00                      5.20              2,548.00 Labour Spending Variance = 140F Labour Rate Variance = 588F It means Labour Efficiency variance = 588 - 140 = 448U Actual output                  210.00 Labour hrs reqd(210 *2 )                  420.00 DLEV = (SH-AH)SR -448 = (420 -AH)6.40 -70 = 420 - AH AH = 490 DLRV= (SR-AR)AH 588= (6.40 - AR)490 1.2 = 6.40- AR AR = 5.2

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