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 Standard Standard Hours Rate Cost 2.50 $36.00 $90.00 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 56 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance $400 F Labor spending $500 U variance 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.) hours Actual labor hours Actual hourly rate per hour

Answer 1

1.	Actual labor hours	165	hours
2.	Actual hourly rate	$33.58	per hours

Explanation:

1.

Labor spending variance = Labor rate variance + Labor efficiency variance

$ 500 = -$ 400 + Labor efficiency variance

Labor efficiency variance = $ 500 + $ 400 = $ 900

(Actual hours – Standard hours) x Standard rate = $ 900

(Actual hours – 2.5 x 56) x $ 36 = $ 900

(Actual hours – 140) = $ 900/$36 = 25

Actual hours = 25 + 140 = 165

Number of actual labor-hours spent on tune-ups during the week is 165 hours.                                                                                                                                             

2.

Labor rate variance = (Actual rate – Standard rate) x Actual hours worked

           -$ 400 = (Actual rate - $ 36) x 165

      Actual rate - $ 36 = -$ 400/165 = - $ 2.424242424

Actual rate = $ 36 - $ 2.424242424 = $ 33.57575758 or $ 33.58

Actual hourly rate of pay for tune-ups last week is $ 33.58