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 Hours	Standard Rate	Standard Cost
Motor tune-up	2.50	$32.00	$80.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 52 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	300	F
Labor spending variance	$	340	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

Answer:- 1)- Actual labor hours = 150 hours

2)- Actual hourly rate = $30 per hour

Explanation- Labor efficiency variance = Labor spending variance - Labor Rate variance

= $340 – (-$300)

= $640

Labor efficiency variance = (Standard hours- Actual hours)*Standard rate per hour

$640 = (130 hours – Actual hours)*$32.00 per hour

Actual hour = 150 hours

Where- Standard hours = Standard hours per tune up*Actual tune-ups

= 2.5 standard hours per unit*52 tune-ups

= 130 hours

Labor Rate variance = (Standard rate – Actual rate) * Actual payment hour

$-300 = ($32.00 per hour –Actual rate per hour)*150 hours   

Actual Rate = $30 per hour