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 Standard Hours Standard Rate Standard Cost Motor tune-up 1.50 $6.20 $9.30 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 230 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance $ 392 F Labor spending variance $ 507 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.)

Explanation / Answer

ans)

1. If the labor spending variance is $507 unfavorable, and the rate variance is $392 favorable, then the effciency variance must be$899 unfavorable, because the rate and effciency variances taken together always equal the spending variance. Knowing that the effciency variance is $899 unfavorable, one approachto the solution would be:

Effciency variance = SR (AH – SH)

$6.2per hour (AH – 345 hours*) = $899 U

$6.2 per hour × AH – $2139 = $899**

$6.2 per hour × AH = $3038

AH = $3038 ÷ $6.2per hour

AH = 490 hours

*230 X 1.5 = 345 hours

**When used with the formula, unfavorable variances arepositive and favorable variances are negative.

2) Rate variance = AH (AR – SR)

345 hours (AR – $6.20 per hour) = $392F

345 hours × AR – $2139= –$392*

345 hours × AR = $1747

AR = $1747 ÷ 345 hours

AR = $5.06 per hour

*When used with the formula, unfavorable variances arepositive and favorable variances are negative.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.