SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of

Question

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company's products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 6,000 of these meals using 1,150 direct labor-hours. The company paid these direct labor workers a total of $11,500 for this work, or $10.00 per hour $9.50 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 6,000 meals? How much does this differ from the actual direct labor cost? (Round labor-hours per meal and labor cost per hour to 2 decimal places.) Number of meals prepared Total direct labor-hours allowed Standard direct labor cost per hour Total standard direct labor cost Actual cost incurred Total standard direct labor cost Total direct labor variance 2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Labor rate variance Labor efficiency variance

Explanation / Answer

Standard direct labour hours per meal

2) Labour rate variance = (9.5*1150-11500) = 575 Unfavorable

Labour efficiency variance = (1200-1150)*9.5 = 475 Favorable

number of meals prepared 6000

Standard direct labour hours per meal

0.20 Total direct labour allowed 1200 standard direct labour cost per hour 9.5 Total standard direct labour cost 11400 actual cost incurred 11500 Total standard direct labour cost 11400 Total direct labour variance 100 Unfavorable

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