Question

Gorf Products had the following variances for the year 2015: Direct labor rate variance $9,000 U Total direct labor variance $21,000 F These variances were based on a standard of 6,000 total labor hours allowed (to produce 1,000 actual units) and a standard of $20 per hour of labor. What was the actual rate paid this period?

None of these are correct

$22

$18

$21

$20

Answer 1

Total Direct labor Variance = (Actual hrs x Actual rate) - (Standard hours x Standard rate)

- $ 21,000 = (Actual hrs x Actual rate) - (6,000 x 20)

- $ 21,000 = (Actual hrs x Actual rate) - $ 120,000

(Actual hrs x Actual rate) = $ 120,000 - $ 21,000

(Actual hrs x Actual rate) = $ 99,000

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Direct labor rate Variance = (Actual rate x Actual hours worked) - (Actual hrs x Std rate)

                $ 9,000 = $ 99,000 – (Actual hrs x $20)

                Actual hrs x $ 20 = $ 99,000 - $ 9,000

            Actual hrs = $ 90,000/$ 20

                Actual hrs = 4,500 hrs

(Actual rate x Actual hours worked) = $ 99,000

Actual rate x 4,500 = $ 99,000

Actual rate = $ 99,000/4,500

Actual rate = $ 22

Hence option “$ 22” is correct answer.