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 2.20 Standard Cost $12.10 Standar Rate $5.50 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 130 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 865 U $ 477 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.) Actual labor hours Actual hourly rate 1. hours 2.

Explanation / Answer

Std hours per tune up 2.20 hour per tune up Std rate per hour $ 5.50 per hour Actual activity   130 tune ups Std hours for actual activity ( 130*2.20 ) = 286 hours Labour rate variance = 477 F Labour Spending Variance = $ 865U Therefore Labour Efficiency Variance = $1342 U (Labour spending = Labour rate+ Labour efficincy) Labour efficiency variance = Std rate per hour (Std hours for actual activity - Actual hours worked)       - 1342 = 5.50 (286 - Actual hours worked ) Actual hours worked = 530 hours labour rate variance = Actual hours worked (Std rate - actual rate)       477 =   530 ( 5.50 - Actual rate) Actual rate per hour = $ 4.60 per hour

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