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 2.5 $25.00 $62.50 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 $ 150 F Labor spending variance $ 200 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:

a. 150 hours

b. 24.2 hours

Explanation:

Given

Motor tune-up

Standard Hours 2.5

Standard Rate $25.00

Standard Cost $62.50

Labor rate variance $ 150 F

Labor spending variance $ 200 U

Tuneups = 50

a.

Efficiency Variance = Labor Rate Variance + Labor Spending Variance

Efficiency Variance = 150 + 200 = 350

Total Standard Rate = Standard Rate * Actual Hours

Total Standard Rate = 25 * AH

Total Standard Hours = Standard Hours * Turn ups

Total Standard Hours = 2.5 * 50= 150

Efficiency Variance = Standard Rate (Actual Hours - Total Standard Hours)

350 = 25 (AH - 150)

14 = AH - 150

AH = 150 + 14

AH = 164 hours

b.

Rate Variance = AH (Actual Rate - Standard Rate)

Where AH = 164

Actual Rate = ?

Standard Rate = 25

Rate Variance = -150 ---- Given

So

-150 = 164(AR -25)

-150/164 = AR - 25

AR = 25 - 150/164

AR = 3950/164

AR = 24.08537 ---

AR = 24.1 --- Approximated