Question

Exercise 10-5 Working Backwards from Labor Variances [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:

Job	Standard Hours	Standard Rate	Standard Cost
Motor tune-up	2.5	$9.00	$22.50

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.)

     

Answer 1

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