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	$30.00	$75.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 50 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	250	F
Labor spending variance	$	200	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. Labor time variance = Labor spending variance -  Labor rate variance

= - 200 - 250 = $450 Unfavorable

Labor time variance = (Actual labor-hours spent - Standard hours allowed)*Standard rate per hour

450 = (Actual labor-hours spent - 50*2.50)*$30

Actual labor-hours spent = 140 hours

2. Labor rate variance = (Actual hourly rate - Standard rate per hour)*Actual hours worked

- 250 = (Actual hourly rate - $30)*140

Actual hourly rate = $28.21 per hour