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 2.00 $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 $ 440 F Labor spending variance $ 392 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 Hours Spent on tune ups = 471.25

2. Actual Rate per hour = $5.47

Explanation:

Provided Information

Standard Hours = 2

Standard Rate = $6.40

Standard Cost = $12.80

Labor Rate Variance = (Standard Rate - Actual Rate) $\times$ Actual Hours = $440 F

Labor Spending Variance = (Standard Hours - Actual Hours) $\times$ Standard Rate = $392 U

With labor Spending Variance we can compute actual hours

- $392 = (2 $\times$ 210 - AH) $\times$ $6.40

- $392 = (410 - AH) $\times$ $6.40

-$392/$6.40 = 410 - AH

- 61.25 = 410 - AH

AH = 410 + 61.25 = 471.25

Putting values of Actual Hours in Labor rate Variance we have

$440 = ($6.40 - AR) $\times$ 471.25

$440/471.25 = $6.40 - AR

$0.934 + AR = $6.40

AR = $6.40 - $0.934 = $5.47