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 7,200 of these meals using 3,500 direct labor-hours. The company paid its direct labor workers a total of $31,500 for this work, or $9.00 per hour.

According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $8.50 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 7,200 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 7,200 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.)

.

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

Direct materials: 8 microns per toy at $0.34 per micron

Direct labor: 1.4 hours per toy at $6.70 per hour

During July, the company produced 5,000 Maze toys. The toy's production data for the month are as follows:

Direct materials: 78,000 microns were purchased at a cost of $0.33 per micron. 28,000 of these microns were still in inventory at the end of the month.

Direct labor: 7,500 direct labor-hours were worked at a cost of $54,750.

Required:

1. Compute the following variances for July: (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. Round final answer to the nearest whole dollar amount.)

a. The materials price and quantity variances.

b. The labor rate and efficiency variances.

Answer 1

Q1.
Std Hours allowed per meal:					0.5
Std hours allowed for actual output (7200*0.50)					3600
Std rate per hour					8.5
Actual hours worked					3500
Actual rate per hour					9
Actual Labor cost					31,500
Std Labour hours allowed:
Std Labor hour per meal					0.5
Multiply: Actual meals produced					7200
Std Labor hour per meal					3600
Std Labor cost allowed:
Std hours allowed for actual output					3600
Multiply: Std rate per hour					8.5
Std Labor cost allowed:					30600
Labor spending variance:
Std Labor cost for actual output					30600
Less: Actual Labor cost					31500
Labor spending variance:					900	U
Labor rate variance = Actual hours (Std rate - Actual rate)
		3500 (8.50-9.00) = 1750 U
Labor efficiency variance = Std rate (Std hours - Actual hours)
		8.50 (3600-3500) = 850 F
Q2.
Material
Std qty allowed for actual output (5000*8)					40000
Std price per unit					0.34
Actual Qty purchased					78000
Actual Qty used		(78000-28000)			50000
Actual price per unit					0.33
Material Price variance = Actual Qty purchased (Std price - Actual price)
		78,000 (0.34-0.33) = 780 f
Material Qty variance = Std price (Std qty -Actual qty)
		0.34 (40000-50000) = 3400 U
Labor:
Std Hours allowed for actual output (5000*1.4)					7000
Std rate per hour					6.7
Actual hours worked					7500
Actual rate per hour (54750/7500)					7.3
Labor rate variance = Actual hours (Std rate - Actual rate)
		7500 (6.7 - 7.30) = 4500 U
Labor efficiency variance = Std rate (Std hours - Actual hours )
		6.70 (7000-7500) = 3350 U