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 3,400 of these meals using 1,300 direct labor-hours. The company paid these direct labor workers a total of $16,900 for this work, or $13.00 per hour. According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $12.00 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 3,400 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.) 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 Total standard direct labor cost Total direct labor variance 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).) Labor rate variance Labor efficiency variance

Explanation / Answer

According to standard, standard cost and actual cost difference :

2. Break down :

Labour rate variance = (Standard rate-actual rate)actual hours

= (12*1300-16900)

Labour rate variance = 1300 U

Labour efficiency variance = (Standard hour-actual hour)standard rate

= (3400*.4-1300)12

Labour efficiency variance = 720 F

Number of meals prepared 3400 Standard direct labour hours per meal 0.40 Total direct labour hour allowed 1360 Standard direct labour cost per hour 12 Total standard direct labour cost 16320 Actual cost incurred 16900 Total standard direct labour cost 16320 Total direct labour variance 580 Unfavourable

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