Question

ABC Manufacturing Company uses a standard cost accounting system. In 2020, 28,000 units were produced. Each unit took several kilograms of direct materials and 1.6 standard hours of direct labour at a standard hourly rate of $9. Normal capacity was 50,700 direct labour hours. During the year, 109,200 kg of raw materials were purchased at $0.92 per kilogram. All materials purchased were used during the year.

If the labour price variance was $13,665 favourable, what was the actual rate per hour? (Round answer to 2 decimal places, e.g. 15.25.)

Actual rate per hour

$

Answer 1

From the given,

Actual hours = 50,700

Standard rate = $9 per hr

Labor price variance = -$13,665

==> Labor price variance = Actual hours X ( Actual rate per hr - Standard rate per hr)

==> - $13,665 = 50,700 X ( Actual rate per hr - $9)

==> - $13,665 = 50,700 (Actual rate per hr) - 50,700 X $9

==>  - $13,665 = 50,700 (Actual rate per hr) - $456,300

==> Actual rate per hr = ( $456,300 -$13,665 ) / 50,700

==> Actual rate per hr = $442,635 / 50,700 = $8.73

Therefore, Actual rate per hr = $8.73