The standard cost of direct labor per hour is $8.00. Four standard direct labor hours are allowed per finished good. During the current period, 350 finished goods were produced using 1,350 direct labor hours. The direct labor price variance is $405, unfavorable. Calculate the actual cost of direct labor per hour.

Question

Quizplus · Accepted Answer

The actual cost of direct labor per hour can be calculated by first determining the total actual cost of direct labor, then dividing by the actual hours worked. The direct labor price variance formula is: (Actual Rate - Standard Rate) x Actual Hours = Price Variance. Rearranging to solve for the Actual Rate gives: Actual Rate = (Price Variance / Actual Hours) + Standard Rate. Substituting the given values: Actual Rate = ($405 / 1350) + $8.00 = $0.30 + $8.00 = $8.30.

The Standard Cost of Direct Labor Per Hour Is $8