EXERCISE 11-3 Direct Labor Variances (LO3] SkyChefs, products is grilled salmon

Question

EXERCISE 11-3 Direct Labor Variances (LO3] SkyChefs, 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 960 direct labor-hours. The company paid these direct labor workers a total of $9.600 Inc., prepares in-flight meals for a number of major airlines. One of the conm 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. 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- ency variance

Explanation / Answer

1) Schedule :

4000 meals

2) Labour rate variance = (9.75-10)*960 = 240 U

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

No of meals prepared

4000 meals

Standard labour hour per meal 0.25 Standard labour hour allowed 1000 Rate per hour 9.75 Standard labour cost 9750 Actual labour cost 9600 Total labour cost variance 150 F

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