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 6,300 of these meals using 1,800 direct labor-hours. The company paid its direct labor workers a total of $18,000 for this work, or $10.00 per hour.

According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $9.20 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 6,300 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 6,300 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.)

Answer 1

Solution:
1.	standard labor-hours allowed (SH) to prepare 6,300 meals		1890 hours
Working Notes:
	standard labor-hours allowed (SH) to prepare 6,300 meals	= No. of meals prepared x Standard direct labor-hours per meals
		= 6,300 meals x 0.30 hour per meal
		=1,890 hours
2.	Standard labor cost allowed (SH × SR) to prepare 6,300 meals	$17,388
Working Notes:
	Standard labor cost allowed (SH × SR) to prepare 6,300 meals	= SH × SR
		=1,890 hours x $9.20 per hour
		=$17,388
	SR is standard rate per standard hour =$9.20
3.	labor spending variance	$612          U
Working Notes:
	labor spending variance = Actual cost (AH x AR) - Standard labor cost (SH × SR)
	labor spending variance = $18,000 - $17,388
	labor spending variance = $612 U
	variance is +ve & actual cost is higher , its unfavorable
4.	labor rate variance	$1,440        U
	labor efficiency variance	$828            F
Working Notes:
	labor rate variance =Actual cost (AH × AR) - (AH × SR)
	labor rate variance =(1,800 × $10) - ($1800 × $9.20)
	labor rate variance =$18,000 - $16,560
	labor rate variance =$1,440   U
	variance is +ve & actual cost is higher , its unfavorable
	labor efficiency variance = (AH × SR) - (SH × SR)
	labor efficiency variance = ($1800 × $9.20) - $17,388
	labor efficiency variance = $16,560 - $17,388
	labor efficiency variance = -$828
	labor efficiency variance = $828 F
	variance is -ve its favorable
Please feel free to ask if anything about above solution in comment section of the question.