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	1.50	$6.00	$9.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 150 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	188	F
Labor spending variance	$	1,282	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.Determine the number of actual labor-hours spent on tune-ups during the week.
	Effiency Variance = 188+1282 = 1470
Also,	Effiency Variance = SR(AH-SH)
	1470 = $6(AH - 150*1.50 hrs)
	1470 = $6(AH - 225)
	245 = AH -225
	AH = 245+225
	AH = 470 hrs
	Therfore, Actual hrs worked is 470 hrs
2.Determine the actual hourly rate of pay for tune-ups last week
	Rate Variance = AH(AR-SR)
	-188 = 470(AR-$6)
	-0.4 = AR - 6
	Actual Rate = -0.4+6
	Actual Rate =$ 5.6 per hr