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.

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? (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 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.

Explanation / Answer

SkyChefs Inc. Details Actual no of meals Actual Direct Labor Hr Actual rate/DLH Actual Cost Std Hr/Unit Std Rate/Hr Std Hrs for Actual Output Std cost for Actual Output Labor Cost                       6,200.00        1,200.00                 9.00    10,800.00         0.20         8.50    1,240.00        10,540.00 Standard cost for producing 6200 meals is   = $ 10,540.00 Difference of standard cost & Actual cost =            260.00 U Direct Labor rate variacne = Actual Direct labor Hrs *(Actual direct labor rate/hr-Std Direct labor rate/hr)                      = 1200*(9-8.50) = 600 U Direct Labor efficiency Variance = Std Direct labor rate/hr*( Actual Direct labor hrs-std direct labor hrs for actual output)              =8.50*(1200-1240) = 340 F

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