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 4,800 of these meals using 1,400 direct labor-hours. The company paid its direct labor workers a total of $18,200 for this work, or $13.00 per hour.

According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $12.50 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 4,800 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 4,800 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 not round intermediate calculations.)

Answer 1

Answer No.
	No. of Meals prepared	4800
	Standard direct labour hour per meal	0.3
1)	Standard labor hours allowed	1440
	Standard direct labour cost per hr	12.5
2)	Standard labor cost allow	18000
	Actual cost incurred	18200
	Total standard direct cost	18000
3)	Labor spending variance	200	Unfavorable
4)	LABOUR RATE VARIANCE	700	Unfavorable
	LABOUR Efficiency VARIANCE	500	Favorable
	Labour Rate Variance = (Standard Rate - Actual Rate) Actual Hrs Worked
	= (12.5 -13)* 1400
	700	Unfavorable
	Labour Efficiency Variance = (Standard Hrs. - Actual Hrs) Standard Rate
	=(1440-1400)*12.5
	500	Favorable