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 6,500 of these meals using 3,200 direct labor-hours. The company paid these direct labor workers a total of $36,800 for this work, or $11.50 per hour. According to the standard cost card for this meal, it should require 0.50 direct labor- hours at a cost of $11.00 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 6,500 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

Answer 1

Requirement 1:

i	Number of meals prepared	6,500
ii	Standard direct labor-hours per meal	0.50
iii	Total direct labor-hours allowed (i x ii)	3,250
iv	Standard direct labor cost per hour	$11.00
v	Total standard direct labor cost (iii x iv)	$35,750
vi	Actual cost incurred (given)	$36,800
vii	Total standard direct labor cost (from v)	$35,750
viii	Total direct labor variance (vi - vii)	$1,050	Unfavorable

Requirement 2:

Labor rate variance	1,600	Unfavorable
Labor efficiency variance	550	Favorable

Calculations:

i.Labor rate variance = Actual hours (Actual rate per hour - Standard rate per hour)

= 3,200 ($11.50-$11.00)

= 3,200 x $0.50

= $1,600 Unfavorable

ii.Labor efficiency variance = Standard rate per hour (Actual labor hours - Standard labor hours)

= $11.00 (3,200-3,250)

= $11 x -$55

= $550 Favorable