Exercise 8-5 Direct Labor Variances [LO8-5] SkyChefs, Inc., prepares in-flight m

Question

Exercise 8-5 Direct Labor Variances [LO8-5]

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 4,400 of these meals using 1,700 direct labor-hours. The company paid these direct labor workers a total of $17,000 for this work, or $10.00 per hour.

     According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $9.40 per hour.

According to the standards, what direct labor cost should have been incurred to prepare 4,400 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.)

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).)

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 4,400 of these meals using 1,700 direct labor-hours. The company paid these direct labor workers a total of $17,000 for this work, or $10.00 per hour.

Explanation / Answer

1) According to the standards, what direct labor cost should have been incurred to prepare 4,400 meals? How much does this differ from the actual direct labor cost

Standard cost = 4400*.40*9.40 = 16544

Actual cost = 17000

Actual cost is greater than standard cost by 456 U

2) Labour rate variance = (9.4*1700-17000) = 1020 U

Labour efficiency variance = (4400*.40-1700)*9.4 = 564 F

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.