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 7,200 of these meals using 3,500 direct labor-hours. The company paid these direct labor workers a total of $31,500 for this work, or $9.00 per hour. According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $8.50 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 7,200 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.) 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).)

Explanation / Answer

Labor rate variance = actual quantity*actual rate - actual quantity*standard rate

actual quantity = 3500 direct labor hours. actual rate = $9 per hour. standard rate = $8.50 per hour

labor rate variance = 3500 hours*$9 per hour - 3500 hours*$8.50 per hour

= $1,750 (Unfavorable)

Labor efficiency variance = actual hours*standard rate - standard hours*standard rate

standard hours = 7200 meals*0.50 direct labor hour per meal = 3600 hours

labor efficiency variance = 3500 hours*$8.50 per hour - 3600 hours*$8.50 per hour

= - $850 (favorable)

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