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	$ 29.00	$ 72.50

The record showing the time spent in the shop last week on motor tune-ups has been misplaced. However, the shop supervisor recalls that 54 tune-ups were completed during the week, and the controller recalls the following variance data relating to tune-ups:

Labor rate variance	$ 120	F
Labor spending variance	$ 170	U

Required:

Determine the number of actual labor-hours spent on tune-ups during the week.

Determine the actual hourly pay rate for tune-ups last week.

Note: Round your answer to 2 decimal places.

Explanation:

If the labor spending variance is $170 unfavorable, and the labor rate variance is $120 favorable, then the labor efficiency variance must be $290 unfavorable, because the labor rate and labor efficiency variances taken together always equal the spending variance. Knowing that the labor efficiency variance is $290 unfavorable, one approach to the solution would be:

Labor efficiency variance = SR (AH SH)

$29.00 per hour (AH 135 hours*) = $290 U

$29.00 per hour AH $3,915 = $290**

$29.00 per hour AH = $4,205

AH = $4,205 $29.00 per hour

AH = 145.00 hours

*54 jobs 2.50 hours per job = 135 hours

**When used with the formula, unfavorable variances are positive and favorable variances are negative.

Labor rate variance = AH (AR SR)

145 hours (AR $29.00 per hour) = $120 F

145 hours AR $4,205 = $120*

145 hours AR = $4,085

AR = $4,085 145 hours

AR = $28.17 per hour (rounded)

*When used with the formula, unfavorable variances are positive and favorable variances are negative.