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 1.50 Standard Rate Standard Cost Motor tune-up $6.00 $9.00 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 150 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 S440 F $1,510 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 2. Actual hourly rate hours per hour

Explanation / Answer

Std hours required per tune up 1.50 hour per tune up Std labour rate per hour $ 6 per hour Actual Activity   150 tune ups Std labour hours allowed for actual activity ( 150*1.50 ) = 225 hours Labour Spending variance = 1510 U Labour rate variance    =             440 F Therefore, Labour Efficiency Variance = 1950 U (as spending= rate+efficiency) Now, Labour Efficiency variance = Std rate per hour (Std hours allowed- Actual labour hours used)                           -1950 = $ 6( 225 - Actual labour hours used)       Therefore, Actual Labour hours used = 550 hours Now, Labour rate variance = Actual hours used (Std rate per hour - Actual rate per hour )                   440   =    550 ($ 6 - Actual rate per hour ) Therefore, Actual Labour rate per hour = $ 5.20 per hour ActualLabour hours 550 hours Actual Labour rate $ 5.20 per hour

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