Pella Car Wash, Inc. expected to wash 2,000 cars during the month of August. Washing each car was expected to require 0.2 hour of labor. The company actually used 420 hours of labor to wash 1,880 cars. The labor usage variance was $880 unfavorable. Requireda. Determine the standard labor price. b. If the actual labor rate is $17.50, indicate whether the labor price variance would be favorable (F) or unfavorable (U).

Question

Mckenna

Business

29 October, 02:28

Pella Car Wash, Inc. expected to wash 2,000 cars during the month of August. Washing each car was expected to require 0.2 hour of labor. The company actually used 420 hours of labor to wash 1,880 cars. The labor usage variance was $880 unfavorable. Requireda. Determine the standard labor price. b. If the actual labor rate is $17.50, indicate whether the labor price variance would be favorable (F) or unfavorable (U).

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Answers (1)

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Carley Hood · Answer 1

Standard labour rate = $19.6 (unfavourable).

Explanation:

The labour cost variance can be calculated as below:

Variance = Actual cost - Standard cost

= Actual labour rate x Actual hour of labour - Standard labour rate x Actual hour of labour

Putting all the number together, we get:

880 = 17.5 x 420 - Standard labour rate x 420. Solve the equation, we get: Standard labour rate = 19.6 (unfavourable)