Question

Mexicali On the Go Inc. owns and operates food trucks (mobile kitchens) throughout the west coast. The company’s employees have varying wage levels depending on their experience and length of time with the company. Employees work 8-hour shifts and are assigned to a truck each day based on labor needs to support the daily menu. One of its trucks, Donna’s Mobile Fiesta offers a single menu item that changes daily. On May 6, the truck prepared 150 of its most popular item, the Breakfast Enchilada. The following data are available for that day: Quantity of direct labor used 24 hrs. (3 employees, working 8 hour shifts) Actual rate for direct labor $16.70 per hr. Standard direct labor per meal 0.1 hr. Standard rate for direct labor $17.30 per hr. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your answers to the nearest cent. Direct Labor Rate Variance $ Direct Labor Time Variance $ Direct Labor Cost Variance $ Discuss what might have caused these variances. Unfavorable time variance will occur any time the number of meals actually made number of meals that could be generated by employees in the mobile kitchen

Answer 1

ANSWER :-

a	Computation of variances:
	Labor Rate variance = (Standard rate - Actual rate) * Actual hours
	Labor Rate variance = ( $17.30/hr-$16.70/hr ) * 24 hr = $14.40 (Favorable)
	As actual rate is less than standard rate it is FAVOURABLE as the expenses incurred are less than budget expenses
	Standard hours = No.of meals *direct labor per meal = 150*0.1 = 15 hours Labor Time variance = (Actual hours - Standard Hours) * Standard rate Labor efficiency variance = (24 hr-15 hr) *$17.30/hr = 155.70(Unfavorable) As Actual hours used are more than standard hours it is UNFAVOURABLE
	Total DirectLabor Cost variance = (Standard rate * Standard hours)- ( Actual Rate*Actual hours)
	Total DirectLabor Cost variance = ($17.30*15)-(16.70*24) = 259.50 - 400.80 = -141.30(UNFAVOURABLE)

Solution b:

Actual cost is more than budgeted cost so UNFAVOURABLE