The Worldwide Credit Card, Inc., uses standards to control the labor time involv

Question

The Worldwide Credit Card, Inc., uses standards to control the labor time involved in opening mail from card holders and recording the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opening and recording each batch. The labor standards relating to one batch are as follows:

The record showing the time spent last week in opening batches of mail has been misplaced. However, the batch supervisor recalls that 160 batches were received and opened during the week, and the controller recalls the following variance data relating to these batches:

Determine the actual hourly rate paid to employees for opening batches last week. (Round your answer to 2 decimal places.)

The Worldwide Credit Card, Inc., uses standards to control the labor time involved in opening mail from card holders and recording the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opening and recording each batch. The labor standards relating to one batch are as follows:

Explanation / Answer

Answer:1 If the total labor spending variance is $456 U, and if the labor rate variance is $141 U, then the labor efficiency variance must be $315 U, because the labor rate and labor efficiency variances taken together equal the total labor spending variance.

Knowing that the labor efficiency variance is $315 U, one approach to the solution would be:

Labor efficiency variance = SR (AH – SH)

$4.50 per hour (AH – 400 hours*) = $315 U

$4.50 per hour × AH – $1800 = $315**

$4.50 per hour × AH = $2115

AH = 470 hours

*160 batches × 2.50 hours per batch = 400 hours

**When used with the formula, unfavorable variances are positive and favorable variances are negative.

Answer:2

Labor efficiency variance= Standard Hours Allowed for Actual Output, at Standard Rate (SH × SR) -Actual Hours of Input, at Standard Rate (AH × SR)

315U =400 hours*$4.50 per hour-x hours*4.50 per hour

315 U=1800--4.5 x

2115=4.5 x

x=470 hours

Labor rate variance=Actual Hours of Input, at Standard Rate (AH × SR)-Actual Hours of Input, at Actual Rate (AH × AR)

141 U=470 hours*4.50 per hour-470*AR

141U=2115-470 x

2256 =470 X

X=4.80 per hours

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