Question

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company's product 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 its 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.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 6,200 meals?

2. What is the standard labor cost allowed (SH x SR) to prepare 6,200 meals?

3. What is the labor spending variance?

4. What is the labor rate variance and the labor efficiency variance?

1. Standard labor-hours allowed _____
2. Standard labor cost allowed _____
3. Labor spending variance _____ _____
4. Labor rate variance _____ _____
Labor efficiency variance _____ _____

Answer 1

Answer:

1. Standard labor-hours allowed _____ 1240

2. Standard labor cost allowed _____$ 10 540

3. Labor spending variance _____ _____ 260 unfav

4. Labor rate variance _____ _____ $ 600 unfav

Labor efficiency variance _____ _____$ 340 fav

Explanation:

SkyChefs, Inc.

1.The standard labor-hours allowed (SH) to prepare 6,200 meals

= 0.2 * 6200 = 1240

2. The standard labor cost allowed (SH x SR) to prepare 6,200 meals=

1240 * $ 8.5= $ 10 540

3. Labor Spending Variance= Labor Rate Variance + Labor Efficiency Variance

                       =600 unfav + 340 unfav = 260 unfavorable

4. Direct Labor Rate variance= (actual hours* actual rate)- (actual hours * standard rate)

Direct Labor Rate variance= (1200 *9.00)- (1200* $ 8.5)= $ 10800- $ 10200 = = $ 600 Unfav

4. Direct labor time variance= (actual hours* standard rate)- (standard hours * standard rate) = ( 1200 * $ 8.5) - ( 1240 * $ 8.5)=  10200- 10540= 340 fav