AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of

Question

AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company prepared 7,200 of these meals using 3,500 direct labor-hours. The company paid these 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 According to the standards, what direct labor cost should have been incurred to prepare 7,200 meals? How much does this differ from the actual direct labor cost?

Explanation / Answer

2)

Labour rate Variance =AH(SR-AR)

=3,500(8.5-9)

=$1,750-U

Labour Efficiency Variance=SR(SH-AH)

=8.5(3600-3500)

=$850-F

  

Number of meals prepared 7,200 Standard hours required per meal 0.5 Total Direct labour hours allowed 3,600 Standard direct labour cost per hour $8.5 Total Standard Labour cost $30,600 Actual cost incurred $31,500 Standard direct labour cost $30,600 Spending variance-Unfavourable $900

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