Question

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 2,350 direct labor-hours. The company paid its direct labor workers a total of $23,500 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $9.40 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.) 1. Standard labor-hours allowed Standard labor cost allowed Labor spending variance Labor rate variance Labor efficiency variance

Answer 1

Ans. 1	Standard direct labor hours = Actual production * Standard hours allowed per unit
	4,800 meals * 0.50 hours per meal
	2,400 hours
Ans. 2	Standard labor cost allowed = Standard direct labor hours allowed * Standard rate
	2,400 * $9.40
	$22,560
Ans. 3	Labor spending variance = Standard labor cost - Actual labor cost
	$22,560 - $23,500
	-$940	or   $940 unfavorable
Ans. 4	Labor rate variance = (Standard rate - Actual rate) * Actual hours
	($9.40 - $10) * 2,350
	-$0.60 * 2,350
	-$1,410	or $1,410 unfavorable
	Labor efficiency variance = (Standard hours - Actual hours) * Standard rate
	(2,400 - 2,350) * $9.40
	50 * $9.40
	$470	or   $470   favorable