Question

ch8 exer #5

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	2.10	$6.50	$13.65

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 140 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	705	F
Labor spending variance	$	439	U

Required:

a.

Determine the number of actual labor-hours spent on tune-ups during the week.

Actual labor hours

hours

b.

Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.)

Actual hourly rate

per hour

Answer 1

Labour Rate Variance = 705(F)

Labour Spending Variance = 439 (U)

Labour spending variance = Labour Rate Variance + Labour Efficiency Variance

439(U) = 705(F) + Labour Eff Variance

Labour Eff Variance = 1144 (U)

Labour Eff Variance = (Std Hrs – Actual Hrs) * Std Rate

1144(U) = ({140*2.10} – Actual Hrs) * 6.50

1144(U) = 1911 – 6.50 Actual Hrs

Actual Hrs = 470 Hrs

(b) Actual Hourly rate :-

Labour Rate Variance = (SR – AR) * Actual Hrs

705(F) = (6.50 – AR) * 470

705(F) = 3055 – 470 AR

Actual rate = 5