AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of

Question

AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. 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?

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).)

Need help with number 2 only. thanks!

AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. 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

Labor Rate Variance = Actual Hours Worked * (Actual Rate - Standard Rate) Labor Efficiency Variance = Standard Rate * ( Actual Hours Worked - Std Hours Required) Actual Hours = 1200 Standard Hours = 0.20*6200 = 1240 Standard Rate - $8.50 Actual Rate - $9 Labor Rate Variance = 1200 * ($9 - $8.50) = $600 (U) Labor Efficieny Variance = $8.50 * (1200 - 1240) = $340 (F)

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