Information on Wolfen Company's direct labor costs for the month of January follows: Actual direct labor rate $5.00 Standard direct labor hours allowed 11,000 Actual direct labor hours 10,000 Direct labor ratefavorable $6,500 What was the standard hourly direct labor rate in effect for the month of January?

Question

Alissa Grant

Business

7 February, 11:25

Information on Wolfen Company's direct labor costs for the month of January follows: Actual direct labor rate $5.00 Standard direct labor hours allowed 11,000 Actual direct labor hours 10,000 Direct labor ratefavorable $6,500 What was the standard hourly direct labor rate in effect for the month of January?

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Answers (1)

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Brenton · Answer 1

Standard Rate = $ 5.65

Explanation:

Wolfen Company

Actual direct labor rate $5.00

Standard direct labor hours allowed 11,000

Actual direct labor hours 10,000

Direct labor rate favorable $6,500

Using formula to find the unknown figure

Direct Labor Rate variance = Actual Hours (Standard Rate-Actual Rate)

$6,500 = 10,000 (Standard Rate-5)

$6,500/10,000 = (Standard Rate-5)

0.65 + 5=Standard Rate

Standard Rate=5+0.65 = $ 5.65

We can check by putting it in another formula

Direct Labor Rate variance = (actual hours * standard rate) - (actual hours * actual rate)

$6,500 = (10,000*Standard Rate) - (10,000 * 5.0)

$6,500 = (10,000*5.65) - (10,000 * 5.0)

$6,500 = (56,500) - (50,000)

$6,500=$6,500 (favorable) when standard price is higher than actual price