The standard cost of direct labor per hour is $15.00. Two and one half standard direct labor hours are allowed per unit of finished goods. During the current period, 80 units were produced using 1850 direct labor hours. The direct labor rate variance is $1100 unfavorable. Calculate the actual cost of direct labor per hour.
A)$15.00
B)$23.13
C)$15.59
D)$0.59

Question

Quizplus · Accepted Answer

First, we need to calculate the standard cost per unit:
2.5 standard labor hours per unit x $15 per standard labor hour = $37.50 standard cost per unit
Next, we need to calculate the total standard cost of the direct labor used:
80 units produced x $37.50 standard cost per unit = $3,000 total standard cost
To find the actual cost of direct labor per hour, we use the formula:
Actual cost = Standard rate + Rate variance
$15.00 + Rate variance = Actual cost
We know that the rate variance is $1,100 unfavorable, so:
$15.00 - $1,100 / 1850 actual labor hours = $15.59
Therefore, the actual cost of direct labor per hour is $15.59, which is closest to option C.

The Standard Cost of Direct Labor Per Hour Is $15