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Homework answers / question archive / The auto repair shop of Quality Motor Company uses standards to control the labour time and labour cost in the shop
The auto repair shop of Quality Motor Company uses standards to control the labour time and labour cost in the shop. The standard labour cost for a motor tune-up follows: Standard Hours Standard Rate Standard Cost Job Motor tune-up 3 $9 $27 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: Labour rate variance $90 F Total labour variance 96 U Required: 1. Determine the number of actual labour-hours spent on tune-ups during the week. 2. Determine the actual hourly rate of pay for tune-ups last week.
Solution - Note 1 - Given details are of standard cost for one motor tune up. But 50 tune up were completed during the week. So, standard cost details of 50 tune ups are needed.
| Number of tune up | Total standard hours | Standard rate | Total standard cost |
| 50 | = 50 * 3 hour = 150 hours | $ 3 | = 150 * 3 = $ 1,350 |
Note 2 - Given that total labour variance = 96 U or -96 and labour rate variance = 90 F or 90.
Total labour variance = labour rate variance + labour efficiency variance
So, labour efficiency variance = 186 U or -186
Solution 1 - Labour efficiency variance = ( standard hours - actual hours ) * standard rate = -186
Labour efficiency variance = ( 150 - actual hours ) * $ 9 = -186
So, ( 150 - actual hours ) * $ 9 = -186
Solve for actual hours :-
So, Actual hours = 1536 / 9 = 170.6666 = 170.67 hours (rounded upto two decimal places)
So, actual labour hours spent on tune ups during the week ( 50 tune ups ) = 170.67 hours (rounded upto two decimal palces).
Actual hour spent on one tune up = 170.67 / 50 = 3.4134 hour
Solution 2 - Labour rate variance = ( standard rate - actual rate ) * actual hours = 90
Labour rate variance = ( 9 - actual rate ) * 170.67 = 90
So, ( 9 - actual rate ) * 170.67 = 90
solve for actual rate,
actual rate = 1446.03 / 170.67 = $ 8.47266 = $ 8.47 (rounded upto two decimal places)
So, actual hourly rate for tune ups = $ 8.47 (rounded upto two decimal places)
