Valatia Ltd has gathered the following data in preparing to record their direct labour payroll costs for the week: $\begin{array} { l l }
\text { Actual hours worked } & 9,500 \
\text { Stardard hours allowed } & 10,000 \
\text { Total direct labour variance } & \$ 1,810 \mathrm {~F} \
\text { Direct labour price variance } & \$ 190 \mathrm { U }
\end{array}$
The actual direct labour price was:
A) $8.00
B) $4.00
C) $4.02
D) $50

Question

Valatia Ltd has gathered the following data in preparing to record their direct labour payroll costs for the week: $\begin{array} { l l } 
\text { Actual hours worked } & 9,500 \
\text { Stardard hours allowed } & 10,000 \
\text { Total direct labour variance } & \$ 1,810 \mathrm {~F} \
\text { Direct labour price variance } & \$ 190 \mathrm { U }
\end{array}$ 
The actual direct labour price was:
A) $8.00
B) $4.00
C) $4.02
D) $50

Quizplus · Accepted Answer

The total direct labour variance is given as $1,810 Favourable (F), and the direct labour price variance is $190 Unfavourable (U). To find the actual direct labour price, we first need to calculate the direct labour efficiency variance, which is the difference between the total direct labour variance and the direct labour price variance. Direct Labour Efficiency Variance = Total Direct Labour Variance - Direct Labour Price Variance = $1,810 F - $190 U = $2,000 Favourable.The efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Since we have the efficiency variance and the actual and standard hours, we can solve for the standard rate.$2,000 = (9,500 - 10,000) x Standard Rate$2,000 = -500 x Standard RateStandard Rate = $2,000 / -500 = -$4.00 (The negative sign indicates that the actual hours are less than the standard hours, leading to a favourable variance).To find the actual rate, we use the price variance formula: Direct Labour Price Variance = (Actual Rate - Standard Rate) x Actual Hours.$190 U = (Actual Rate - $4.00) x 9,500$190 = (Actual Rate - $4.00) x 9,500Solving for the Actual Rate:Actual Rate = $4.02Therefore, the actual direct labour price was $4.02.

Valatia Ltd Has Gathered the Following Data in Preparing to Record