Sky Chefs, Inc. prepares in-flight meals for a number of major airlines One of t

Question

Sky Chefs, 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 piepared 4,000 of these meals using 960 direct labor-hours The company 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 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? Break down the difference computed in (1) abobe into a labor rate variance and a labor efficiency variance.

Explanation / Answer

1.

2. Direct labour rate variance = (S.R - AR) Actaul Hours

= (9.75 -10) x 960

= 240 U

Direct labour hour varinace = (S. hrs - A. hrs) x S.R

= (1000 - 960) x 9.75

= 390 F

Meal prepared 4000 Standard direct labour hours per meal 0.25 Total direct labour hours allowed 1000 Standard direct labour cost per hour 9.75 Total standard direct labour cost 9750 Actual cost incurred 9600 Total standard direct cost 9750 Total Direct labour variance 150 F

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