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:

Standard Hours

Standard Rate

Standard Cost

Motor tune-up

1.50

$6.00

$9.00

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 150 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance

$

188

F

Labor spending variance

$

1,282

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.)

	Standard Hours	Standard Rate	Standard Cost
Motor tune-up	1.50	$6.00	$9.00

Solution

1.Determine the number of actual labor-hours spent on tune-ups during the week. Effiency Variance = 188+1282 = 1470 Also, Effiency Variance = SR(AH-SH) 1470 = $6(AH - 150*1.50 hrs) 1470 = $6(AH - 225) 245 = AH -225 AH = 245+225 AH = 470 hrs Therfore, Actual hrs worked is 470 hrs 2.Determine the actual hourly rate of pay for tune-ups last week Rate Variance = AH(AR-SR) -188 = 470(AR-$6) -0.4 = AR - 6 Actual Rate = -0.4+6 Actual Rate =$ 5.6 per hr