Exercise 10-5 Working Backwards from Labor Variances [LO10-2]
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 | $34.00 | $85.00 |
The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 54 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:
Labor rate variance | $ | 350 | F |
Labor spending variance | $ | 500 | 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.)
Labor efficiency variance = Labor spending variance +Labor rate variance = 500+350 = $850 U |
1 |
Labor efficiency variance = SR*(AH-SH) |
850 = 34.00*(AH-54*2.50) |
25 = AH-135 |
AH = 135+25 = 160 |
Actual labor-hours = 160 hours |
2 |
Labor rate variance = AH*(SR-AR) |
350 = 160*(34.00-AR) |
2.19 = 34.00-AR |
AR = 34.00-2.19= $31.81 |
Actual hourly rate = $31.81 |
Exercise 10-5 Working Backwards from Labor Variances [LO10-2] The auto repair shop of Quality Motor Company uses standar...
Exercise 10-5 Working Backwards from Labor Variances [LO10-2] 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 Standard Hours Standard Rate Standard Cost Motor tune-up 2.5 $9.00 $22.50 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...
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