SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of
ID: 2468918 • Letter: S
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 6,600 of these meals using 1,950 direct labor-hours. The company paid these direct labor workers a total of $27,300 for this work, or $14.00 per hour. According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $13.00 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 6,600 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 efficiency variance.Explanation / Answer
SRSH SRAH ARAH
13 x 1980 13 x 1950 14 x 1950
=$25,740 =$25,350 =$27,300
SR= Standard Rate per Labor hr=$13
SH= Standard hrs required for actual production= 0.30 x 6,600= 1,980 hrs
ARAH=Actual Labor cost=$27,300
AR= Actual rate per labor hr=$14
AH= Actual hrs worked=1,950 hrs
No of meals prepared =6,600 meals
Standard direct labor hrs per meal =0.30 hr
Total direct labor hrs allowed=1,980 hrs
Standard direct labor cost per hr=$13
Total standard direct labor cost=$25,740
Actual cost incurred= $27,300
Total Direct labor variance = SRSH-ARAH=$25,740-$27,300 =$1,560 U
Direct Labor rate variance= SRAH- ARAH=$25,350-$27,300=$1,950 U
Direct Labor effeciancy variance= SRSH- SRAH=$25,740-$25,350=$390 F
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