The auto repair shop of Quality Motor Company uses standards

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: Job Motor tune-up Standard Standard Standard Rate $620 Hours 1.50 Cost S9.30 The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 230 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups: Labor rate variance Labor spending variance $470 F $305 U Required: 1. Determine the number of actual labor-hours spent on tune-ups during the week. hours 2. Determine the actual hourly rate of pay for tune-ups last week. (Round your answer to 2 decimal places.) rate per hour

Solution

Labor efficiency variance = 305+470= 775 U 1 Labor efficiency variance = SR*(AH-SH) 775 = 6.2*(AH-230*1.5) 125= AH-345 AH = 345+125 = 470 Actual labor hours 470 hours 2 Labor rate variance = AH*(SR-AR) 470=470*(6.2-AR) AR = 6.2-1 = 5.2 Actual hourly rate $5.2 per hour