The actual cost of direct labour per hour is $13.00. Two standard direct labour hours are allowed per finished good. During the current period, 2,000 finished goods were produced using 3,800 direct labour hours. The direct labour efficiency variance is $1,300, favourable. Calculate the standard direct labour rate per hour.

Question

Quizplus · Accepted Answer

Direct labour efficiency variance = (standard hours - actual hours) x standard rate = ($26.00 - $13.00) x (2,000 - (3,800/2)) = $1,300 (favourable)
Solving for the standard rate:
$13.00 x 2 = $26.00 (standard cost for labour per finished good)
$26.00/standard hour = $13.00 (standard rate per hour)
Thus, the standard direct labour rate per hour is $13.00/2 = $6.50. Therefore, the best choice is B.

The Actual Cost of Direct Labour Per Hour Is $13