Exercise 10-5 Working Backwards from Labor Variances [LO10-2]
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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 | 2.5 | $9.00 | $22.50 |
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The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 50 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: |
| Labor rate variance | $ | 87 | F |
| Labor spending variance | $ | 93 | 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.) |
| Actual labour hours | 135.33 | |
| Actual houirly rate | 8.36 | |
| Labour Efficiency Variance = (Standard Hrs. - Actual Hrs) Standard Rate | ||
| -93 =(50*2.5 - actual hrs) *9 | ||
| Actual Hours = 93/9 +125 | ||
| Actual hours = 135 | ||
| Labour Rate Variance = (Standard Rate - Actual Rate) Actual Hrs Worked | ||
| 87 = (9 -actual rate )* 135.33 | ||
| Actual rate =9 - 87/135.33 | ||
| Actual rate =8.36 | ||
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