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19 September, 04:54

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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  1. 19 September, 06:19
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    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
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