Dem Mfg. has gathered the following data in preparing to record their direct labour payroll costs for the week: $$\begin{array} { l l }
\text { Actual hours morked } & 18,500 \
\text { Standard hours allowed } & 20,000 \
\text { Total direct labour variance } & \$ 8,300 \mathrm {~F} \
\text { Direct labour price variance } & \$ 3,700 \mathrm { U }
\end{array}$$ The actual direct labour price was:
A) $8.00
B) $8.20
C) $9.10
D) $7.80

Question

Dem Mfg. has gathered the following data in preparing to record their direct labour payroll costs for the week: $$\begin{array} { l l } 
\text { Actual hours morked } & 18,500 \
\text { Standard hours allowed } & 20,000 \
\text { Total direct labour variance } & \$ 8,300 \mathrm {~F} \
\text { Direct labour price variance } & \$ 3,700 \mathrm { U }
\end{array}$$ The actual direct labour price was:
A) $8.00
B) $8.20
C) $9.10
D) $7.80

Quizplus · Accepted Answer

The total direct labour variance is favorable ($8,300 F), which means the actual costs were less than the standard costs. The direct labour price variance is unfavorable ($3,700 U), indicating that the actual price per hour was higher than the standard price per hour. To find the actual direct labour price, we first need to calculate the standard cost of the actual hours worked and then adjust it by the variances.Let's denote:- $SP$ as the standard price per hour,- $AP$ as the actual price per hour,- $AH$ as the actual hours worked (18,500 hours),- $SH$ as the standard hours allowed (20,000 hours).Given:- Total direct labour variance = Actual Cost - Standard Cost = $8,300 F,- Direct labour price variance = (AP - SP) * AH = $3,700 U.Since the total variance is favorable, the standard cost is higher than the actual cost. However, we need to find the actual cost, which can be derived by adjusting the standard cost by the total variance.First, we need to find the standard cost of the actual hours worked. We don't have the standard rate (SP) directly, but we can work backwards using the variances. The direct labour efficiency variance can be calculated as the difference between the total variance and the price variance.Efficiency variance = Total variance - Price variance = $8,300 F - $3,700 U = $12,000 F.The efficiency variance formula is (SH - AH) * SP. Since we know SH, AH, and the efficiency variance, but not SP, we can't directly calculate SP without more information. However, we can find the actual cost and then the actual rate (AP) since we know the actual hours (AH) and the total variance.The actual cost can be inferred from the total variance being favorable, meaning the actual cost is less than the standard cost by $8,300. However, without the standard cost or the standard rate, we cannot directly calculate the actual price per hour (AP) using the given information.Given the constraints of the problem and the information provided, a direct calculation of AP requires an assumption or additional information about the standard price per hour (SP) or the standard cost. Since we're not provided with SP or a direct way to calculate the standard cost, we approach this problem by understanding the relationship between the variances and the costs:- A favorable total variance indicates the actual cost is less than the standard cost.- An unfavorable price variance indicates the actual rate per hour is higher than the standard rate.Without the standard rate or total standard cost, we cannot directly calculate AP. The correct approach involves understanding that the actual cost consists of the actual hours worked multiplied by the actual rate per hour, and the total cost variance gives us insight into the relationship between actual and standard costs. However, without explicit values for SP or the total standard cost, the calculation of AP from the provided data alone is not straightforward. Given the misunderstanding in the initial explanation, let's correct the approach with the information provided:To find the actual direct labour price, we need to correct the approach by directly addressing the variances and their implications on the actual price. However, without a direct formula or additional information in the question, the calculation of the actual direct labour price (AP) from the provided data involves understanding the relationship between the variances and the actual and standard costs, which has been misunderstood in the initial explanation. The correct answer relies on understanding that the total direct labor variance and the direct labor price variance influence the calculation of the actual direct labor price, but without a straightforward formula or additional data in the question, a direct calculation mistake was made in the explanation process.

Dem Mfg Has Gathered the Following Data in Preparing to Record