Question

Exercise 10-2 Direct Labor Varlances [LO10-2] 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 5,100 of these meals using 2000 direct labor-hours. The company paid its direct labor workers a total of $28.000 for this work, or $14.00 per hour. According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $13.50 per hour Requlred: 1. What is the standard labor-hours allowed (SH) to prepare 5,100 meals? 2 What is the standard labor cost allowed (SHx SR) to prepare 5,100 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 favora ble, "U" for unfevorable, and "None" for no effect (l.e., zero varlance). Input all amounts as positive values. Do no round Intermediete calculations.) 1 Standard labor-hours allowed Standard labor cost allowed Labor spending variance 2. 3. Labor rate variance 4. Labor efficiency variance

Answer 1

Solution 1:

Standard labor hours allowed (SH) = 5100* 0.40 = 2040 hours

Solution 2:

Standard labor cost allowed = SH * SR = 2040 * $13.50 = $27,540

Solution 3:

Labor spending variance = Standard labor cost - Actual labor cost = $27540 - $28000 = $460 Unfavorable

Solution 4:

Labor rate variance = (SR - AR) * AH = ($13.50 - $14) * 2000 = $1000 unfavorable

Labor efficiency variance = (SH - AH) * SR = (2040 - 2000) * $13.50 = $540 Favorable