Exercise 154 Sarasota Inc is trying to establish the standar

*Exercise 15-4 Sarasota, Inc. is trying to establish the standard labor cost of a typical oil change. The following data have been collected from time and motion studies conducted over the past month Actual time spent on the oil change Hourly wage rate Payroll taxes Setup and downtime Cleanup and rest periods Fringe benefits 1.00 hour $10 10% of wage rate 18% of actual labor time 32% of actual labor time 25% of wage rate Determine the standard direct labor hours per oil change. (Round answer to 2 decimal places, e.g. 1.25.) Standard direct labor hours per oil change Determine the standard direct labor hourly rate.(Round answer to 2 decimal places, e.g. 1.25.) hours Standard direct labor hourly rate Determine the standard direct labor cost per oil change. (Round answer to 2 decimal places, e.g. 1.25.) Standard direct labor cost per oil change If a oil change took 1.60 hours at the standard hourly rate, what was the direct labor quantity variance? (Round answer to 2 decimal places, e.g. 1.25.)

Solution

a) Std direct labor hrs per oil change = Actual time+Setup and downtime+Clearup and rest periods

= 1.00 hour+(1.00 hour*18%)+(1.00 hour*32%)

= 1.00+0.18+0.32 = 1.50 hrs

b) Std direct labor hourly rate = Actual labor rate+Payroll taxes+Fringe benefits

= $10.00+($10*10%)+($10*25%)

= $10.00+$1.00+$2.50 = $13.50

c) Standard direct labor cost per oil change = Std labor hours*Std labor rate

= 1.50 hours*$13.50 = $20.25

d) Direct labor quantity variance = (Std hours - Actual hours)*Std rate per hour

= (1.50 hrs - 1.60 hrs)*$13.50 per hour

= ($1.35) Unfavorable