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	Standard Rate	Standard Cost
Motor tune-up	3.00	$7.00	$21.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 250 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	1,272	F
Labor spending variance	$	2,812	F

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.)

Answer 1

1. Labor spending variance = (standard hours - actual hours)*standard rate

2812 = (250*3 - Actual labor hours)*7

Actual labor hours = 348 hours

2. Labor rate variance = (standard rate - actual hourly rate)*actual hours

1272 = (7-actual hourly rate)*348

Actual hourly rate = $3.34 per hour