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 7,300 of these meals using 1,450 direct labor-hours. The company paid its direct labor workers a total of $14,500 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $9.50 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 7,300 meals? 2. What is the standard labor cost allowed (SH × SR) to prepare 7,300 meals? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance?

Explanation / Answer

1. Standard labor hours allowed= 7300*.20 = 1460 hours

2 .Standard labor cost = 1460*9.5 = $13870

3. Labor spending variance = $(14500-13870) = $630 Adverse

4. Labor rate variance= (10-9.50)*1450 = $725 Adverse

Labor efficiency variance = (1460-1450)*9.5 = $95 Favorable

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