The Company uses standard costing. The company makes and sells a single product

Question

The Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August:

• Actual cost of direct material purchased and used: $61,162
• Material price variance: $3,462 unfavorable
• Total materials variance: $25,462 unfavorable
• Standard cost per pound of material: $5
• Standard cost per direct labor-hour: $5
• Actual direct labor-hours: 9,910 hours
• Labor efficiency variance: $4,000 favorable
• Standard number of direct labor-hours per unit of Roff: 3 hours
• Total labor variance: $1,946 unfavorable

The actual direct labor rate per hour was which one:
$5.30 $5.60 $5.00 or $15.00

Explanation / Answer

labor efficiency variance (LEV) =4000F = -4000 Direct Labor Rate Variance (DLRV) Formula: [Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate)] ie DLRV = (9910*Act Rate) - (9910*$5) Total labor variance (TLV)= $1946U = 1946 = LEV+DLRV = -4000 + (9910*Act Rate) - (9910*$5) So Actual Rate per Lab Hr = (4000+1946+9910*5)/9910 = $5.60 ...Ans

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