Question

Baird Car Wash, Inc. expected to wash 1,000 cars during the month of August. Washing each car was expected to require 0.2 hour of labor. The company actually used 210 hours of labor to wash 920 cars. The labor usage variance was $442 unfavorable. Required Determine the standard labor price. If the actual labor rate is $13, indicate whether the labor price variance would be favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Answer 1

Answer :

i) standard labour price = $17

ii) labour price Variance = $840 (favourable)

Explanation :

1) labour usage variance = (standard hours - actual hours) × standard rate

Standard hours = 920 × 0.2 = 184 hours

Therefore,

-$442 = (184 -210 ) × standard rate

- $442 = -26 × standard rate

Standard rate = $442 ÷ 26

Standard rate = $17 per hour

2) labour price Variance = (standard rate - actual rate) × actual hours

= ($17 - $13) × 210 hours

= $4 × 210

= $840 (favourable)