Exercise 10-2 Direct Labor Variances [LO10-2] SkyChefs, Inc., prepares in-flight

Question

Exercise 10-2 Direct Labor Variances [LO10-2] 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 3,500 of these meals using 950 direct labor-hours. The company paid its direct labor workers a total of $10,450 for this work, or $11.00 per hour. According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $9.50 per hour. Required: 1. What is the standard labor-hours allowed (SH) to prepare 3,500 meals? 2. What is the standard labor cost allowed (SHx SR) to prepare 3,500 meals? 3. What is the labor spending variance? 4. What is the labor rate variance and the labor efficiency variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do no round intermediate calculations.) 1 Standard labor-hours allowed 2.Standard labor cost allowed 3.Labor spending variance 4. Labor rate variance Labor efficiency variance

Explanation / Answer

1 Standard Labour hours allowed(SH) =Total meals*Standasrd laour hour per meal =3500*0.30 hrs =1050 hrs 2 Standard Direct Labour cost =Standard Direct labours * Standard rate per Hour =1050hrs *$9.50 =$9975 3 Direct Labour Spending Variance =Actual cost of labour - Standard cost of labour =$10450-$9975 =$475 Unfavarable 4 direct labour rate and Efficiemcy variance Direct labour rate variance =Actual Hours *(Standard rate - Actual rate ) =950 hrs *($9.50-$11.00) =$1425 Unfavorable Direct labour efficiency variance =(Actual hours * Standard rate ) - (Standard hours* Standard rate) =(950*$9.50) -(1050*9.50) =($950) favorable

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