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

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 6,200 of these meals using 1,200 direct labor-hours. The company paid these direct labor workers a total of $10,800 for this work, or $9.00 per hour. According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $8.50 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 6,200 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. 2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance.

Explanation / Answer

1) Schedule :

2) Labour rate variance = (8.5*1200-10800) = 600 U

Labour efficiency variance = (1240-1200)*8.5 = 340 F

No of meals prepared 6200 Standard labour hour per meal 0.20 Standard hour allowed 1240 Rate per hour 8.50 Standard cost 10540 Actual cost 10800 Standard cost 10540 Total labour variance 260 U

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