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 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.

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? (Round labor-hours per meal and labor cost per hour to 2 decimal places.)

Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

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 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.

Explanation / Answer

1) According to the standards, direct labor cost that

                         should be incurred to prepare 4,000 meals = 4000*0.25*9.75 = $9,750

   Actual direct labor cost = $9,600

Difference = 9750 - 9600 = 150 Favourable

2) Labor Rate Variance = ( Standard rate - Labor Rate)*Actual hours

                                   = ( 9.75 - 10 )*960 = $240 unfavourable

   Labor Efficiency variance = ( Standard hours - Actual hours) * Standard rate

                                        = ( 1000 - 960 )*9.75 = 390 Favourable

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.