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 5,600 of these meals using 2,700 direct labor-hours. The company paid these direct labor workers a total of $21,600 for this work, or $8.00 per hour.

According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $7.50 per hour.

   

Required:
1.	According to the standards, what direct labor cost should have been incurred to prepare 5,600 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.)

     

2.	Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

Particulars	Standard			Actual
	Hours	Rate	amount	Hours	Rate	amount
Labour	2,800.00	7.50	21,000.00	2,700.00	8.0000	21,600.00
Actual Output	5,600.00
Hours required= 6,500*.50	2,800.00
Direct Labour cost variance = Standard cost - Actual cost
Direct Labour cost variance = 21000 - 21600
Direct Labour cost variance = 600 U
DLRV= (SR-AR)AH
DLRV= (7.50 - 8)2700
DLRV= 1,350 U
DLEV = (SH-AH)SR
DLEV = (2800 - 2700) 7.50
DLEV = 750 F