Question

Flint, Inc. is trying to establish the standard labor cost of a typical oil change. The following data have been collected from time and motion studies conducted over the past month:

Actual time spent on the oil change 1.25 hour
Hourly wage rate $15.00
Payroll taxes 10% of wage rate
Setup and downtime 22% of actual labor time
Cleanup and rest periods 28% of actual labor time
Fringe benefits 25% of wage rate

Required:
1. Determine the standard direct labor hours per oil change. (Round answer to 2 decimal places, e.g. 2.75.)
2. Determine the standard direct labor hourly rate. (Round answer to 2 decimal places, e.g. 2.75.)
3. Determine the standard direct labor cost per oil change. (Round answer to 2 decimal places, e.g. 2.75.)

Answer 1

1. 1.875 hours

2. $20.25

3. $37.97

Step-by-step explanation:

The computation is shown below:

1. For Standard direct labor hours per oil change, it is

= (Actual time spent on the oil change) + (Setup and downtime + Cleanup and rest periods) × Actual time spent on the oil change

= 1.25 hours + (22% + 28%) × 1.25 hours

= 1.25 hours + 0.625 hours

= 1.875 hours

2. Standard direct labor hourly rate, it is

= (Hourly wage rate) + (Payroll taxes + Fringe Benefits) × hourly wage rate

= $15 + (10% + 25%) × $15

= $15 + $5.25

= $20.25

3. And, the standard direct labor cost per change is

= Standard direct labor hours per oil change × Standard direct labor hourly rate

= 1.875 hours × $20.25

= $37.97

We simply applied the above formulas for each one part