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

ID: 2467941 • Letter: S

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 3,500 of these meals using 950 direct labor-hours. The company paid these direct labor workers a total of $10,450 for this work, or $11.00 per hour.

According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $9.50 per hour.

According to the standards, what direct labor cost should have been incurred to prepare 3,500 meals? How much does this differ from the actual direct labor cost? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Round labor-hours per meal and labor cost per hour to 2 decimal places.)

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

Labour Efficiency Varriance = (SH*SR)- (AH*SR)

= $9975- $9025 = $950 F

Labour Rate Varriance = (SR*AH) - (ar*ah)

= $9025- $10450 = -$1425 U

No. of Meals Prepared 3500 Standard Lab. Hrs. per Meal 0.30 Total Direct Lab. Hrs. Allowed 1050 Standard Lab. Hrs. Rate $9.50 Total Standard Direct Labour Cost $9,975.00

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

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

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