Exercise 10-2 Direct Labor Variances [L010-2] SkyChefs, Inc., prepares in-fight
ID: 2414191 • Letter: E
Question
Exercise 10-2 Direct Labor Variances [L010-2] SkyChefs, Inc., prepares in-fight 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 6.500 of these meals using 3,200 direct labor-hours. The company paid its direct labor workers a total of $36,800 for this work, or $11.50 per hour According to the standard cost card for this meal, it should require 0.50 direct labor-hours at a cost of $11.00 per hour Required 1. What is the standard labor-hours allowed (SH) to prepare 6,500 meals? 2. What is the standard labor cost allowed (SH SR) to prepare 6,500 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 (le., zero variance), Input all amounts as positive values. Do no round intermediate calculations.) 1. Standard labor-hours allowed 2. Standard labor cost allowed 3. Labor spending variance 4. Labor rate variance Labor efficiency varñianoeExplanation / Answer
1.Standard Labor Hours allowed = Standard labor hours per unit*Actual production
= 6500*0.50 = 3,250 hours
2.Standard Labor Cost Allowed= Actual Hours*Standard Rate
= 3200*11 = $ 35,200
4.Labor Rate Variance = Actual Hours*Actual Rate - Actual Hours* Standard Rate
= 3,200*11.50 - 3,200*11 = 36,800-35,200 = 1,600 (Unfavorable)
Note: Since the amount incurred on labour is higher than the standard amount, labour rate variance is adverse.
5.Labour Efficiency Variance = (Actual Hours - Standard Hours)*Standard Rate
= (3200-3250)*11 = 550 (Favorable)
Note: Since the number of hours actually used is lower than standard hours allowed, labour efficiency variance is favorable.
3.Labour Spending Variance= Standard Cost for actual output - Actual labour cost
= 11*3250- 11.50*3200 = 35,750- 36,800 = 1,050 (Unfavorable)
Note: Labor Spending Variance = Labor Rate Variance+ Labor Efficiency Variance
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