Question

Quality Motor Company is an auto repair shop that uses standards to control its labor time and labor cost. The standard labor cost for a motor tune-up is given below: Standard Hours Standard Rate Standard Cost Motor tune-up 2.50 $38.00 $95.00 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 58 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance $ 450 F Labor spending variance $ 500 U Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week. 2. Determine the actual hourly pay rate for tune-ups last week.

Answer 1

Answer and Explanation:

The computation is shown below:

1

Labor efficiency variance = Labor spending variance+Labor rate variance

= $450 + $500

= $950U

Now as we know that  

Labor efficiency variance = SR × (AH-SH)

950 = $38 × (AH - 58 × 2.50)

950 = $38 × (AH - 145)

25 = AH - 145

AH = 145 + 25

= 170

Actual labor hours = 170 hours

2

Labor rate variance = AH × (SR-AR)

450 = 170 × ($38 - AR)

2.65 =  38 - AR

AR = 38 - 2.65

= $35.35