ezto.mheducation.com points The auto repair shop of Quality Motor Company uses s

Question

ezto.mheducation.com points 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 Standard Hours Motor tune-up Standard Rate Standard Cost 2.5 $9.00 $22.50 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 50 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 $87 F $93 U Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week 115: hours 2. Determine the actual hourly rate of pay for tune-ups last week. places.) (Round your answer to 2 decimal $ 9.76 per hour

Explanation / Answer

SOLUTION

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

$180 U = $9.00 per hour * (Actual hour - 125 hours)

$180 U = $9.00 per hour * Actual hour - $1,125

$9.00 per hour * Actual hour = $1,305

Actual hour = $1,305 / $9.00

Actual hour = 145 hours.

Standard hours = 50 jobs * 2.5 hours per job = 125 hours

Total variance = Rate variance + Efficiency variance

93 U = 87 F + Efficiency variance

Efficiency variance = 93 + 87 = 180 U

2. Rate variance = Actual Hour * (Actual rate - Standard rate)

-87 = 145 * (Actual rate - $9.00)

-87 = 145 Actual rate - 1,305

145 Actual rate = 1,305 - 87

145 Actual rate =1,218

Actual rate = 1,218/145

Actual rate = $8.40 per hour

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