The auto repair shop of Quality Motor Company uses standards to control the labo

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:

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 230 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

  Job Standard Hours   Standard Rate   Standard Cost     Motor tune-up 1.50         $6.20         $9.30       

Explanation / Answer

Labor Efficiency Variance = Stnd hrs vs Actual hrs x Stnd Rate.
Stnd Hrs were 345 ( 1.5 * 230); $ 411 U Efficiency Variance / 6.2 Stnd Rate = 66.3 hrs U + 400 Stnd hrs = 466.3 Actual hrs.

Labor rate variance = Stnd rate vs Actual rate x Actual hrs.
Stnd rate is 6.2; 612 F Rate Variance / 466.3 Actual hrs = - 1.31 F per hr + 6.2 Stnd = 4.89 Actual rate

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