Question

Exercise 10-2 Direct Labor Variances (LO10-2] Sky Chefs, 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 6,600 of these meals using 1,950 direct labor-hours. The company paid its direct labor workers a total of $27,300 for this work, or $14.00 per hour. According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $13.00 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 6,600 meals? 2. What is the standard labor cost allowed (SH ~ SR) to prepare 6,600 meals? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do no round intermediate calculations.) Standard labor-hours allowed Standard labor cost allowed Labor spending variance Labor rate variance Labor efficiency variance

Answer 1

	Actual Rate per direct labor hours	$14.00
	Actual hours worked	1950	hours
1	Standard labor hours allowed(6,600*0.30 hours)	1980	hours
2	Standard labor Cost allowed(1980 hours*$13.00)	$25,740
3	Labor spending variance	$1,560	Unfavourable
	(Standard rate*Standard hours) - (Actual Rate*Actual hours)
4	Labor rate variance	$1,920	Unfavourable
	Actual hours(Standard rate - Actual rate)
5	Labor efficiency variance	-$390	Favourable
	Standard Rate(Actual Hours - Standard Hours)