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	$31.00	$77.50

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 56 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$	146	F
Labor spending variance	$	102	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

Standard hours for actual   output (SH)

= units produced * Hours required for each unit

    =    56 * 2.50

    =    140 hours

Actual Hours (AH) used = ?

Standard Rate per hour (SR) =   $ 31 per hour

Actual rate per hour ( AR ) = ?

Labor spending Variance =

( SR * SH ) – ( AR * AH ) = - 102

( 140 * 31 ) – ( AH * AR) = -102

AH * AR = 4340 + 102

( AH * AR ) = $ 4442

Labor Rate variance = 146

(SR-AR)*AH = 146

  ( SR * AH ) – ( AR * AH ) = 146

   ( 31 * AH ) – 4442 = 146

     31 AH = 4558

AH = 4588/31

= 148 hours

AR = 4442 / 148

= $ 30.01