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 drill 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 for this meal, it should require 0.30 direct labor-hours at a cost of $4.50 per hour. According to the standards, what direct labor cost should have been incurred to prepare 3,600 meals? How much does this differ from the actual direct labor cost? Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance.

Explanation / Answer

Sky Chef Inc. Number of meals Prepared 3500 Standard direct labor hour per meal 0.3 Total direct labor hour allowed 1050 Standard direct labor cost per hour 9.5 Total direct standard labor cost 9975 Actual cost incurred 10450 Total standard direct labor cost 9975 Total direct Labor variance 475 (U) Labor Efficiency Variance Standard rate(Actual hours-Standard Hours) -950 (F) Labor Rate Variance Actual Hours(Actual Rate-Standard Rate) 1425 (U)

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