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 6,000 of these meals using 1,150 direct labor-hours. The company paid these direct labor workers a total of $11,500 for this work, or $10.00 per hour. According to the standard cost card for this meal, it should require 0.20 direct labor-hours at a cost of $9.50 per hour. Required: 1. According to the standards, what direct labor cost should have been incurred to prepare 6,000 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.) 2. 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).)

Explanation / Answer

1)

*)Standard hour required for 6000 units = .2×6000=1200

Standard cost for 6000 units = 1200×9.5=11400

*)Difference from the actual direct labour cost =Standard cost - Actual cost

standard cost =11400

actual cost =11500

=11400-11500=100 U

2)

Labour rate varience = standard rate - actual rate× actual hours

standard rate =9.50

actual rate =10

actual hours =1150

=9.50-10×1150 = 575 U

Labour efficiency varience = standard hours -actual hours × standard rate

Standard hours =.20×6000=1200

Actual hours =1150

standard rate =9.50

=1200-1150×9.5= 475 F

Total labour varience = 475 -575= 100 U

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