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: Job Motor tune-up Standard Hours Standard Rate Standard Cost 2.00 $6.40 $12.80 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However the shop supervisor recalls that 210 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance Labor spending variance $440 F $392 U Required 1. Determine the number of actual labor-hours spent on tune-ups during the week. I labor hours hours 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places I hourly rate per hour

Explanation / Answer

1

This requires labor efficiency variance

Labor efficiency variance = labor spending variance - labor rate variance = (-392) - 440 = -832

Note: negative means unfavorable variance , positive means favorable variance

Standard labor hours required to complete 210 tune ups is = 210 tune ups * standard labor hours required per tune up = 210 * 2 hours per tune up = 420 hours

Labor efficiency variance = ( standard hours required - Actual hours taken )* standard labor rate per hour

-832= (420 - Actual hours taken )* 6.4

420 - Actual hours taken = -832/6.4 = -130

Actual hours taken = 130+420 = 550 hours

2

Labor rate variance given = 440

Labor rate variance = ( standard rate per hour - actual rate per hour) * actual hours worked

440 = (6.4 - actual rate per hour) * 550

6.4 - actual rate per hour = 440/550 = 0.8

Actual rate per hour = 6.4-0.8 = 5.6 per hour

*Hope the above explanation helps, please comment if further explanation is required. Your rating is appreciated*

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