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

Question

AirChefs, 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 7,000 of these meals using 2,700 direct labor-hours. The company paid these direct labor workers a total of $27,000 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $9.30 per hour. Required: Compute the labor rate variance and the 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

Labour rate variance = (Standard rate-actual rate)actual hour

= (9.30-10)*2700

Labour rate variance = 1890 U

Labour efficiency variance = (Standard hour-actual hour)Standard rate

= (2800-2700)*9.30

Labour efficiency variance = 930 F

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