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: 2.6 Standard Rate: $4.0 Standard cost: $10.4 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 $424U Total labor variance $672U Requirement 1: Determine the number of actual labor-hours spent on tune-ups during the week. Requirement 2: Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 1 decimal place. Omit the "$" sign in your response.)

Answer 1

1.

Standard rate = $4 per hour

Standard time = 2.6 hours per unit

Actual output = 180 units

Hence, standard time for actual output = 180 x 2.6

= 468

Total labor variance = Direct labor rate variance + Direct labor efficiency variance

- 672 = - 424 + Direct labor efficiency variance

Direct labor efficiency variance = $248 U

Direct labor efficiency variance = Standard rate x (Standard time - Actual time)

- 248 = 4 x (468 - Actual time)

468 - Actual time = - 62

Actual time used = 530 hours

2.

Direct labor rate variance = Actual time x (Standard rate - Actual rate)

- 424 = 530 x (4 - Actual rate)

4 - Actual rate = - 0.8

Actual rate = 4.8 per hour

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