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 4,000 of these meals using 750 direct labor-hours. The company paid these direct labor workers a total of $6,000 for this work, or $8.00 per hour.

According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $7.00 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? (Round labor-hours per meal and labor cost per hour to 2 decimal places.)
	Number of meals prepared 800 Standard direct labor-hours per meal 5,000.00 Total direct labor-hours allowed 4,000,000 Standard direct labor cost per hour $1,000.00 Total standard direct labor cost $4,000,000,000 Actual cost incurred $750 Total standard direct labor cost 4,000,000,000 Total direct labor variance $(3,999,999,250) Favorable

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).)
	Labor rate variance $123 F Labor efficiency variance $456 U

Answer 1

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