Question

The standard number of hours that should have been worked for the output attained is 8000 direct labor hours and the actual number of direct labor hours worked was 8300. If the direct labor price variance was $4150 unfavorable, and the standard rate of pay was $9 per direct labor hour, what was the actual rate of pay for direct labor?
A. $9.00 per direct labor hourB. $9.50 per direct labor hourC. $8.50 per direct labor hourD. $7.50 per direct labor hour

Answer 1

Answer:

B. $9.50 per direct labor hour

Explanation:

Expected labor hours (EL) = 8000  

Actual labor hours (AL) = 8300

Labor price variance (LV) = $4150 unfavorable

Standard rate (r) = $9 per hour

The expected labor price (LP) is given by

$ELP = AL*r = 8300*9\\ELP = \ 74700$

Since thre is an unfavorable labor price variance, the actual labor price (ALP) is:

$ALP = ELP + LV\\ALP = 74700+4150\\ALP=78850$

The actual rate of pay is:

$AR = \frac{ALP}{AL} =\frac{78,850}{8300}\\AR=\ 9.50$

The actual rate of pay for direct labor is $9.50 per direct labor hour.