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 7,300 of these meals using 1,450 direct labor-hours. The company paid its direct labor workers a total of $14,500 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $9.50 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 7,300 meals? 2. What is the standard labor cost allowed (SH ~ SR) to prepare 7,300 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 2. 3. 4. Standard labor cost allowed Labor spending variance Labor rate variance Labor efficiency variance

Answer 1

② No. of meals prepared = 7300 Standard direct la bour-hour per meal = 0.20 Standard labour hours allowed to prepare 7300 meals = 7300 x 0.20 [SH] = 1460 direct labour hours Standard direct labour cost per hour - $ 9.50 per hour Standard labour cost allowed to prepare 7300 meals - 1460 X $9.50 [SH X SR] = $ 13,870 © Labour spending variance = labour rate variance + labour efficiency variance = $ 725 V + $95 F = $ 630 U © Labour rate variance - (SR-AR) AH = ($9.50 - $10) x 1450 hrs = $725 (U) Labour efficiency variance = (SM-AH) x SR = (1460 - 1450) * $9.5 = $95 (F)