Monte Services, Inc. is trying to establish the standard labor cost of a typical

Question

Monte Services, 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.

(b) Determine the standard direct labor hourly rate. (Round answer to 2 decimal places, e.g. 1.25.)

Actual time spent on the oil change 4.00 hour Hourly wage rate $12 Payroll taxes 13% of wage rate Setup and downtime 7% of actual labor time Cleanup and rest periods 26% of actual labor time Fringe benefits 24% of wage rate

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Standard direct labor hours per oil change = 4 + 4*.07 + 4*.26 = 5.32 hours

Part B:

Standard direct labor hourly rate = 12 + 12*.13 + 12*.24 = $16.44

Thanks.

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