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	1.90	$6.60	$12.54

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 200 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	1,034	F
Labor spending variance	$	440	F

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

Labor efficiency variance =440F -1034 F = 594 U

1

Labor efficiency variance = SR*(AH-SH)

594 = 6.60*(AH-200*1.90)

90 = AH-380

AH = 380+90 = 470

Actual labor hours = 470 hours

2

Labor rate variance = AH*(SR-AR)

1034 = 470*(6.60-AR)

2.2 = 6.60-AR

AR = 6.60-2.2 = 4.40

Actual hourly rate = 4.40 per hour

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