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 4,300 of these meals using 1,250 direct labor-hours. The company paid these direct labor workers a total of $11,250 for this work, or $9.00 per hour. According to the standard cost card for this meal, it should require 0.30 direct labor- hours at a cost of $8.50 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 4,300 meals? How much does this differ from the actual direct labor cost? (Round labor-hours per meal and labor cost per hour to 2 decimal places. Number of meals prepared Standard direct labor-hours per meal Total direct labor-hours allowed Standard direct labor cost per hour Total standard direct labor cost Actual cost incurred Total standard direct labor cost Tatal direct labor variance

Answer 1

1)

Number of meals prepared (a)	4,300
Standard direct labor hours per meal (b)	0.30 hour
Total direct labor hours allowed (c=a*b)	1,290
Standard direct labor cost per hour (d)	$8.50
Total standard Direct labor cost (e=c*d)	$10,965
Actual cost incurred (f)	$11,250
Total standard direct labor cost (g)	$10,965
Total direct labor variance (g-f)	$(285)	(Unfavorable)

2) a. Labor Rate Variance = (Standard Rate - Actual Rate )*Actual hours

= ($8.50 - $9.00)*1,250 hours

=- $0.50*1,250 hours

= $(625) Unfavorable

b. Labor Efficiency Variance = (Standard Hours - Actual Hours)*Standard Rate

= (1,290 hours - 1,250 hours)*$8.50

= 40 hours* $8.50 = $340 Favorable

Labor Rate Variance	(625)
Labor Efficiency Variance	$340
Total Direct Labor Variance	$(285)