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: Standard Hours Standard Rate Standard Cost Motor tune-up 2.50 $29.00 $72.50 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 54 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance $ 120 F Labor spending variance $ 170 U Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week. 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.)

Answer 1

Answer:

1. Actual Hour = 145 hour

2. Actual rate per hour = 28.17 per hour

Explanation:

According to the scenario, computation of the given data are as follow:-

1). Labor Efficiency Variance= Labor Rate Variance + Labor Spending Variance

= 170 + 120

= 290

Labor Efficiency Variance = Standard Rate × (Standard Hour - Actual Hour)

-290 = 29 × (54 × 2.5-X)  

-290 = 29 × (135 - X)

-290 = 3,915 - 29x

29x = 4,205

X = 4205 ÷ 29 = 145

Actual Hour = 145 hour

2). Labor Rate Variance = Actual Hour × (Standard Rate-Actual Rate)

120 = 145(29-x)

120 = 4,205-145x

145x = 4,085

X= 4,085 ÷ 145

Actual rate per hour = 28.17 per hour