Question

Standards
	kg/hour	per unit
Materials	12	$7	$84
Direct Labour	3	$30	$90
Monthly production data
Units produced	22,000
Materials Used	203,000	kg
Labour worked	60,000	hours
Material purchased	320,000	kg
Material purchased	$2,036,000
Total direct labour variance	$2,378	uf
	Required:
		Actual direct labour rate per hour

Answer 1

• Question only asks for ACTUAL DIRECT LABOR HOUR rate.
• Standard labor hours = 3 hours per unit at $ 30 per hour.

Actual Units = 22,000
Standard hours for actual units = 22,000 units x 3 hours per unit = 66,000 hours
Standard labor cost = 66,000 hours x $ 30 per hour = $ 1,980,000

Hence, standard data for actual 22,000 units:
66000 hours (Standard hours – SH) x $30 per hour (Standard labor rate – SR) = $ 1,980,000 (Standard labor cost)

• Total Direct Labor Variance = $ 2,378 Unfavourable.

This means that actual labor cost is $ 2,378 more than standard labor cost.

Hence, actual labor cost = Standard labor cost + $ 2,738
= $ 1,980,000 + $ 2,738
= $ 1,982,738.

• Answer

Actual Labor hour rate = Actual direct labor cost / Actual hours worked
= $ 1,982,738 / 60,000 hours
= $ 33.05 per hours