Earl Company's direct labor costs for the month of January follow: What was Earl's standard direct labor rate?

Question

Earl Company's direct labor costs for the month of January follow:  What was Earl's standard direct labor rate?

Quizplus · Accepted Answer

Labor rate variance = (actual labor rate per hour - standard labor rate per hour) x actual number of hours worked
$1,800 U = (6.50** - standard labor rate per hour) x 18,000
1,800 U / 18,000 = .10
.10 = 6.50 - standard labor rate per hour
6.40 = standard labor rate per hour (since variance is unfavorable, the standard rate is less than the actual rate)
**Total payroll / actual labor hours worked = actual labor rate per hour
$117,000 / 18,000 = $6.50

Earl Company's Direct Labor Costs for the Month of January