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 5,100 of these meals using 2,000 direct labor-hours. The company paid its direct labor workers a total of $28,000 for this work, or $14.00 per hour.

According to the standard cost card for this meal, it should require 0.40 direct labor-hours at a cost of $13.50 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 5,100 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 5,100 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.)

Explanation / Answer

1. Standard labour hour allowed = (5100*.40) = 2040 Hours

2. Standard labour cost = (2040*13.50) = 27540

3. Labour spending variance= (Standard cost-actual cost)

= (27540-28000)

Labour spending variance = 460 U

4. Labour rate variance = (Standard rate-actual rate)Actual hours

= (13.50-14)2000

Labour rate variance = 1000 U

Labour efficiency variance = (Standard hour-actual hour)Standard rate

= (2040-2000)13.50

Labour efficiency variance = 540 F

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