The actual cost of direct labor per hour is $16.00. Two and one half standard direct labor hours are allowed per unit of finished goods. During the current period, 2700 units were produced using 6500 direct labor hours. The direct labor efficiency variance is $3100 favorable. Calculate the standard direct labor rate per hour.
A)$16.00
B)$12.40
C)$1.15
D)$2.18

Question

Quizplus · Accepted Answer

Direct labor efficiency variance = (Standard hours for actual output - Actual hours worked) x Standard labor rate 
$3100 favorable = (2700 x 2.5 - 6500) x Standard labor rate 
$3100 favorable = (6750 - 6500) x Standard labor rate 
$3100 favorable = 250 x Standard labor rate 
Standard labor rate = $3100 favorable / 250 
Standard labor rate = $12.40

The Actual Cost of Direct Labor Per Hour Is $16