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 Rate Standard Cost Standard Hours 2.50 Motor tune-up $30.00 $75.00 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 50 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance Labor spending variance $ 250 F $ 200 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

Actual output			50	tuneups
Std hours per tuneup			2.5	per tuneup
Std rate per hour			30	per hour
Std hours for actual tuneups (50*2.5)	125	hours
labour rate variance			250	F
labour spending variance		200	U
Labour efficiency Variance = Labour spending variance - Labour rate variance
			200 U - 250F = 450 U
Labour Efficiency Variance= Std rate (Std hours - Actual hours)
450 U = 30 (125- Actual hours)
Actual Hours = 140 hours
Labour Rate variance = Actual hours (Std rate - Actual rate)
250 F = 140 (30- Actual rate)
Actual rate per hour = $ 28.214 per hour