Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 32

Direct labor variances — solving for unknowns Coastal Industries has established direct labor performance standards for its maintenance and repair shop However, some of the labor records were destroyed during a recent fire. The actual hours worked during March were 4,000, and the total direct labor budget variance was $2,200 unfavorable. The standard labor rate was $18 per hour, but recent resignations allowed the firm to hire lower-paid replacement workers for some jobs, and this produced a favorable rate variance of $3,200 for March.

Required:

a. Calculate the actual direct labor rate paid per hour during March.

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b. Calculate the dollar amount of the direct labor efficiency variance for March.

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c. Calculate the standard direct labor hours allowed for the actual level of activity during March. (Hint: Use the formula for the quantity variance and solve for the missing information.)

Step 1 of 3

a.

Calculate the actual direct labor rate paid per hour during August

The actual hours worked during August were 2,500 hours. The total direct labor budget variance is $1,300 unfavorable and direct labor rate variance is $3,500 favorable. The standard labor rate was $16 per hour.

Calculate the direct labor rate paid per hour using the following equation:

The actual rate (A.R) paid per hour during August is