Determining the standard labor price LO 8-6 Wallis Car Wash. Inc., expected to w

Question

Determining the standard labor price LO 8-6 Wallis Car Wash. Inc., expected to wash 1.000 cars during the month of August Washing each car was expected to require 0.3 hours of labor. The company actually used 315 hours of labor to wash 960 cars. The laser usage variance was $459 unfavorable. Determine the standard labor price. Assume the actual labor rate is $12. Calculate the total labor price variance and indicate the effect of the variance by selecting favorable (F) or unfavorable {U). (Select "None" if there is no effect (i.e.. zero variance).)

Explanation / Answer

Wallis Car Wash Inc. All Amounts in $ a. Standard Labour Hours for 960 cars will be 960 X 0.3 = 288 hours Let us assume the standard labor price as X Labor Usage Variance = (Standard Labor Hours - Actual Labor Hours) X Standard Labor Price Hence, -459 = (288 - 315) * X Thus, X = -459 / -27 = $ 17 per labor hour b. The actual labor price is $ 12 Hence the labor price variance will be calculated using the formula (Standard Labor Price - Actual Labor Price) X Actual Labor Hours = ($ 17 - $ 12) X 315 = $ 1,575 F

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