Question

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 1.50 Standard Rate $6.20 Standard Cost $9.30 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 230 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 $ 882 F $ 17 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. 2. Actual labor hours Actual hourly rate hours per hour

Answer 1

a) Labor efficiency variance = 882+17 = 899 U

Labor efficiency variance = (Standard hour-actual hour)Standard rate

-899 = (230*1.5*6.2-6.20X)

6.20X = 2139+899

x(actual hour) = 490 Hour

b) Labor rate variance = (Standard rate-actual rate)actual hour

882 = (6.2*490-490X)

490X = 2156

X(actual rate) = 4.4 per hour