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 4,800 of these meals using 882 direct labor-hours. The company paid its direct labor workers a total of $10,143 for this work, or $11.50 per hour. According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $10.50 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 4,800 meals? 2. What is the standard labor cost allowed (SH SR) to prepare 4,800 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.) 2. 3. 4. Standard labor-hours allowed Standard labor cost allowed Labor spending variance Labor rate variance Labor efficiency variance

Answer 1

Solution

Standard labor hours Allowed	960
Standard labor cost allowed	$   10,080.00
Labor Spending Variance	$           63.00	Unfavourable-U
Labor rate Variance	$         882.00	Unfavourable-U
Labor Efficiency variance	$         819.00	Favourable-F

Working

Standard DATA for		4800	meals
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 0.2 Hour x 4800 meals)=960 Hour	$           10.50	$            10,080.00

.

		4800	meals
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	882	$         11.50	$          10,143.00

.

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                  10.50	-	$                   11.50	)	x	882
	-882
	Variance		$                 882.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	960	-	882	)	x	$           10.50
	819
	Variance		$                 819.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         10,080.00	-	$           10,143.00	)
	-63
	Variance		$                   63.00			Unfavourable-U