Multiplying the direct labor hourly rate by the typical amount of time needed to finish a job yields the baseline cost. One worker, for instance, can turn out ten finished products in just two hours. Standard direct labor time is two hours, and the hourly rate is $9.

## What was the actual rate paid per direct labor hour?

Calculate the hourly wage by dividing the total amount of money paid into direct labor by the total number of hours worked. To continue with the example, let’s say you spent $108,000 on direct labor. Just divide it by the 8,000 hours of direct labor put in. A direct labor hourly rate of $13.50 is the actual rate.

**Daily labor costs – how are they determined?**

Multiply the direct labor hourly rate by the number of direct labor hours needed to produce one unit to get the total. A simple calculation for labor costs would be as follows: if the direct labor hourly rate is $10, and it takes five hours to complete one unit, then the direct labor cost per unit is $50.

### What is a good labor to sales ratio?

Tips for Cutting Wages. A good ratio of labor costs to sales can be established, and it can be decided whether or not to reduce labor costs in order to achieve that ratio. 20–35 percent of revenue should be allocated to pay for labor. Reducing payroll expenses requires careful juggling of competing priorities.

### How much does direct labor cost per hour?

If we assume that the actual number of hours worked directly in January is 50 and that the actual hourly rate of pay (including payroll taxes) is $9, our calculation looks like this:

**How much of a change can we anticipate in the direct labor rate?**

When applied to the 50 actual hours of work, this $1 discrepancy in the direct labor rate yields a $50 net gain. (Another name for the direct labor rate variance is the direct labor price variance.)

#### Is the percentage on direct wages the same as machine rate?

This means that the percentage on direct wages will be used alongside the machine hour rate and direct hour rate to recoup the unallocated costs. Therefore, it is preferable to have a battery of the three systems—machine hour rate, direct labor hour rate, and a percentage on direct wages—in order to achieve desirable results.

#### How is the hourly rate of pay calculated?

By dividing the total cost of benefits and payroll by the total number of hours worked during the pay period, an hourly rate can be calculated. Let’s pretend for a moment that workers put in 40 hours a week at $13 an hour. Additional compensation includes $50 in payroll taxes and $100 in fringe benefits.