Question

Multiple Choice Question 118 The standard number of hours that should have been worked for the output attained is 8200 direct labor hours and the actual number of direct labor hours worked was 8700. If the direct labor price variance was $8700 unfavorable, and the standard rate of pay was $12 per direct labor hour, what was the actual rate of pay for direct labor?

$13 per direct labor hour

$12 per direct labor hour

$11 per direct labor hour

$9 per direct labor hour

Answer 1

Answer: Option a. $ 13 per direct labor hour

Given Information,

SH = 8200

AH = 8700

SR = $ 12 per hour

Direct labor price variance $ 8,700 unfavorable

Calculation of AH is as follows:

Direct labor price Variance = ( AR - SR ) * AH

Let AR be x

$ 8,700 = ( x- $ 12 ) * 8,700

$ 8,700 = 8700x - $ 1,04,400

$ 8,700 + $ 1,04,400 = 8700x

$ 1,13,100= 8700x

x = $ 1,13,100 / 8700

x = $ 13

Thus, AR $ 13.

Actual Rate per labor hour is $ 13.

Where,

AH =	Actual labor hours
SH =	Standard hours for Actual production
SR =	Standard Rate per labor hour
AR =	Actual Rate per labor hour

Note:

Direct labor price variance $ 8,700 unfavorable. That means AR is must have higher than SR in order to price variance result is Unfavorable. We can see that, AR ( $ 13) greater than SR ($ 12).