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 its 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. What is the standard labor-hours allowed (SH) to prepare 4,300 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 4,300 meals?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

Answer 1

Solution

Standard labor hours Allowed	1290
Standard labor cost allowed	$        10,965.00
Labor Spending Variance	$              285.00	Unfavourable-U
Labor rate Variance	$              625.00	Unfavourable-U
Labor Efficiency variance	$              340.00	Favourable-F

Working

Standard DATA for		4300	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct labor	( 0.3 Hour x 4300 Units)=1290 Hour	$                   8.50	$            10,965.00

.

Actual DATA for		4300	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct labor	1250	$       9.00	$          11,250.00

.

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                    8.50	-	$                     9.00	)	x	1250
	-625
	Variance		$                 625.00			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	1290	-	1250	)	x	$              8.50
	340
	Variance		$                 340.00			Favourable-F
Labor Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         10,965.00	-	$           11,250.00	)
	-285
	Variance		$                 285.00			Unfavourable-U