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 180 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

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

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:

Explanation / Answer

Labor Spending Variance= Standard cost of Labor- Actual cost of Labor

                                           = Standard hrs x standard rate- actual hrs x actual rate

                                           =468 x 4 – (actual hrs x actual rate)= -848

                                          = actual hrs x actual rate= 848+ 1872= $2,720

Standard hrs = Standard hrs required for actual production= 2.6 x 180= 468 hrs

Labor Rate Variance= ( Standard Rate per hr of Labor- Actual Rate per hr of Labor-) x Actual hrs worked

   = (Standard Rate per hr of Labor x Actual hrs worked) - (Actual rate x Actual hrs worked)=$1,096 U

=4 x    Actual hrs worked- $2,720= -- 1,096

1)Actual hrs worked= -- 1,096+ 2,720/4

                            =406 hrs

2)

Actual rate= Actual rate x Actual hrs worked/ Actual hrs=$2,720/406= $6.70

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