Question

Rick & Morty's manufactures a product with the following unit standards related to direct labor:

Standard hours	5 labor-hours per unit
Standard rate	$12 per labor-hour

Partial production data for the most recent month are shown below:

	Budget	Actual
Production (units)	850	960
Direct labor hours	4,250	?

An analysis of results for the month included the following variances:

Direct labor rate variance	$3,456 Favorable
Direct labor efficiency variance	$5,760 Favorable

What was the actual rate paid per labor-hour? (Choose the closest answer.)

Answer 1

Direct labor efficiency variance = Standard Rate * (Standard Hours For Actual Production - Actual Hours)
	$5760 (F) =$12 per hour * ([960 units* 5 labor hours] - Actual Hours)
	$5760 =$57600- (12* Actual Hours)
	-$51840 =-12* Actual Hours
	Actual Hours =4320 hours
	Direct labor rate variance =( Actual Hours *Standard Rate) - (Actual Hours * Actual Rate)
	$3456 (f) =(4320*$12) -(4320* Actual Rate)
	Actual Rate Per hour = $11.20 per hour