The XXX Credit Card, Inc., uses standards to control the labor time involved in

Question

The XXX 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: Standard Hours Standard Rate Standard Cost Per batch 1.25 $12.00 $15.00 A The record showing the time spent last week in opening batches of mail has been misplaced. However, the batch supervisor recalls that 168 batches were received and opened during the week, and the controller recalls the following variance data relating to these batches: o O Total labor spending variance s 33 u Labor rate variance A $ F Required: 1. Determine the number of actual labor-hours spent opening batches during the week. 2. Determine the actual hourly rate paid to employees for opening batches last week.

Explanation / Answer

Labour efficiency variance = 330U+150 F = 480 U

Labour efficiency variance = (Standard hour-actual hour)Standard rate

-480 = (168*1.25*12-12X)

-480 = 2520-12X

12X = 3000

X(actual hour) = 250 Hour

Labour rate variance = (Standard rate-actual rate)actual hours

150 = (12*250-X*250)

150 = 3000-250X

250X = 2850

X(Actual hourly rate) = 11.40 per hour

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