During March, 6,000 direct labour hours were worked at a standard cost of $22 per hour. Suppose the direct labour rate variance for March was $1,600 favourable. What was the actual cost per direct labour hour?
A) $17.50
B) $20.00
C) $21.73
D) $22.50

Question

Quizplus · Accepted Answer

The formula for direct labour rate variance is:
Direct labour rate variance = (actual rate - standard rate) x actual hours

We know the following:
Actual hours = 6,000
Standard rate = $22
Direct labour rate variance = $1,600 favourable

$1,600 = (actual rate - $22) x 6,000
$1,600 = actual rate x 6,000 - $22 x 6,000
$1,600 = actual rate x 6,000 - $132,000
$1,600 + $132,000 = actual rate x 6,000
$133,600 = actual rate x 6,000
Actual rate = $22.27

Therefore, the actual cost per direct labour hour is $22.27, which is closest to option C: $21.73.

During March, 6,000 Direct Labour Hours Were Worked at a Standard