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 Job Motor tune-up Standard Hours Standard Rate Standard Cost 2.60 $4.00 $10.40 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 180 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 $846 U $854 U Re bieamine the number of actual labor-hous spent on tune ups during the week 1. Determine the number of actual labor-hours spent on tune-ups during the week. Actual labor hours hours 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.) Actual hourly rate per hour

Explanation / Answer

1) Calculate actual labour hours :

Actual labour cost = Standard cost +Labour spending variance

                            = (180*10.40)+854

Actual labour cost = 2726

Labour rate variance = (standard price-actual price)actual hours

                    -846    = (4*X--2726)

                   -4X       = -1880

    X(actual hours)     = 1880/4 = 470 Hours

2) Actual hourly rate = actual cost/actual hours = 2726/470 = $5.80 per hours

                  

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