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:

Job	Standard Hours	Standard Rate	Standard Cost
Motor tune-up	2.10	$6.50	$13.65

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 140 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	459	F
Labor spending variance	$	945	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.)

Answer 1

1	439 hours
2	$5.45
	Labor Rate Variance	$459	favorable
	Labor Spending Variance	$945	unfavorable
	Workings:
	Labor spending variance =	(Standard hours - Actual hours) * Standard Rate
	$945 U=	[294 - Actual hours] * $6.50
	-$945 =	[294 - Actual hours] * $6.50
	Actual hours =	439 hours
	Labor rate variance =	(Standard Rate - Actual Rate) * Actual hours
	$459 F=	[$6.50 per hr. - Actual Rate.] * 439 hours
	$459 =	[$6.50 per hr. - Actual Rate.] * 439 hours
	Actual rate =	$5.45