AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of
ID: 2495886 • Letter: A
Question
AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. 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.
1 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?
Number of meals prepared
Standard direct labor-hours per meal
Total direct labor-hours allowed
Standard direct labor cost per hour
Total standard direct labor cost
Actual cost incurred
Standard direct labor cost
Spending variance—unfavorable
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).)
Number of meals prepared
Standard direct labor-hours per meal
Total direct labor-hours allowed
Standard direct labor cost per hour
Total standard direct labor cost
Actual cost incurred
Standard direct labor cost
Spending variance—unfavorable
Explanation / Answer
Direct labour rate variance = ( Standard Rate - Actual Rate ) * Actual Hours Worked
= ( 9.50-11)*950 i.e 1425 unfavourable
Direct Labor efficiency variance = ( Standard hours - Actual Hours ) * Standard Rate
= ( 1050-950)*9.50 i.e 950 favourable
Particulars Value Number Of Meals Prepared 3500 meals Standard direct labor hours per meal 0.30 per meal Total Direct labor hours allowed 1050 hours Standard direct labor cost per hour 9.50 per hour Total standard direct labor cost 9975 Actual cost incurred 10450 Standard direct labor cost spending variance 475 unfavourableRelated Questions
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