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	2.50	$32.00	$80.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 52 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	300	F
Labor spending variance	$	340	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.)

1. Actual labor hours hours 2. Actual hourly rate per hour

Answer 1

1.
Standard rate = $32 per hour
Standard time = 2.50 hours per tune up
Actual output = 52 tune ups
Standard time for actual output = Standard time x Actual output
= 2.50 x 52
= $130
Labor spending variance = Direct labor rate variance + Direct labor efficiency variance
- 340 = 300 + Direct labor efficiency variance
Direct labor efficiency variance = $640 U
Direct labor efficiency variance = Standard rate x (Standard time - Actual time)
- 640 = 32 x (130 - Actual time)
130 - Actual time = - 20
Actual time used = 150 hours

2.
Direct labor rate variance = Actual time x (Standard rate - Actual rate)
300 = 150 x (32 - Actual rate)
32 - Actual rate = 2
Actual rate = $30 per hour
Actual labor hours = 150 hours
Actual rate= $30 per hour

1.	Actual labor hours	150	hours
2.	Actual hourly rate	$30	per hour

Kindly comment if you need further assistance. Thanks‼!