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: Standard Hours 2.50 Standard Rate $4.50 Standard Cost $11.25 Motor tune-up The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 160 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune- ups Labor rate variance Labor spending variance 517 U $ 832 U 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.) 1. Actual labor hours hours 2. Actual hourly rate per hour

Explanation / Answer

1. Labor spending variance = (Standard labor hours - Actual labor hours) x Standard rate
- $832 = {(160 x 2.5) - Actual labor hours} x $4.50
  - $832 = (400 - Actual labor hours) x $4.50
Actual labor hours = 584.89

2. Labor rate variance = (Standard rate - Actual hourly rate) x Actual labor hours
- $517 = ($4.50 - Actual rate) x 584.89
  Actual hourly rate = $5.38  

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