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:

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

Actualy Hourly Rate:

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

SOLUTION

(1) Effieciency varaince = $318 + $829 = $1,147

Efficiency variance = Standard rate * (Actual hours - Standard hours)

$1,147 U = $6.20 * (Actual hours - (230 * 1.50))

$1,147 U = $6.20 Actual hours - $2,139

$6.20 Actual hours = $1,147 + $2,139

$6.20 Actual hours = $3,286

Actual hours = 530 hours

(2) labour rate variance = Actual hours * (Actual rate - standard rate)

-$318 = 530 * (Actual rate - $6.20)

-$318 = 530 Actual rate - $3,286

530 Actual rate = $2,968

Actual rate = $5.60

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