Question

SkyChefs, Inc. products is grilled most recent week. th company paid these CISE 10-2 Direct Labor Variances [LO10-21 te Inc.prepares in-flight meals for a number of major airlines. One of the company's is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the sent week, the company prepared 4,000 of these meals using 960 direct labor-hours. The v paid these direct labor workers a total of $9,600 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.75 per hour. Required: 1 According to the standards, what direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost? 2. Break down the difference computed in (1) above into a labor rate variance and a labor effi- ciency variance.

Answer 1

1) Schedule

No of meals prepared	4000
Standard labor hour per meal	0.25
Standard hour allowed	1000
Standard hour per unit	9.75
Standard labor cost	9750
Actual labor cost	9600
Standard labor cost	9750
Total labor variance	150 F

2) Labor rate variance = (9.75*960-9600) = 240 U

Labor efficiency variance = (1000-960)*9.75 = 390 F