Question

Exercise 10-5 Working Backwards from Labor Varlances (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 2.50 Standard Rate Standard Cost $29.00 $72.50 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 54 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 S $ 128 17e 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 1. Actual labor hours 2. Actual hourly rate per hour

Answer 1

Required 1 :
Standard hours for actual tune-ups = Actual tune-ups * Standard hours per tune-up = 54 * 2.50	135
Unfavorable variance is written as a positive value in the formula :
Labor spending variance = ( Actual hours * Actual rate ) - ( Standard hours * Standard rate )
170 = ( Actual hours * Actual rate ) - ( 135 * 29 )
170 = ( Actual hours * Actual rate ) - 3915
( Actual hours * Actual rate ) = 170 + 3915	4085
Favorable variance is written as a negative value in the formula :
Labor rate variance = ( Actual rate - Standard rate ) * Actual hours
Labor rate variance = ( Actual rate * Actual hours ) - ( Standard rate * Actual hours )
-120 = 4085 - ( 29 * Actual hours )
( 29 * Actual hours ) = 4085 + 120
( 29 * Actual hours ) = 4205
Actual hours = 4205 / 29	145

Actual labor hours

145

hours

Required 2 :
( Actual hours * Actual rate ) = 4085
( 145 * Actual rate ) = 4085
Actual rate = 4085 / 145	28.17

Actual hourly rate

28.17

per hour