Question

During January, 7,000 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be?

Answer 1

Answer:

$17.50

Explanation:

Given that,

Direct labor hours = 7,000

Standard cost = $20 per hour

Direct Labor Rate Variance = $17,500 Favorable

(Standard Rate - Actual Rate) × Actual Hours = $17,500 Favorable

(20 - Actual Rate) × 7,000 = $17,500 Favorable

140,000 - 7,000 Actual Rate = $17,500 Favorable

Therefore,

7,000 Actual rate = (140,000 - $17,500)

Actual rate = 122,500 ÷ 7,000

                  = $17.50