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?

Answer 1

1) standard labor hour allowed = (5100*0.40)

standard labor hour allowed = 2040 hours

2) standard labor cost allowed = 2040*13.50

standard labor cost allowed = 27540

3) labor spending variance = (standard cost-actual cost)

labor spending variance = (27540-28000) = 460 U

4) labor rate variance = (standard rate-actual rate)*actual hour

labor rate variance = (13.50-14)*2000 = 1000 U

Labor effiency variance = (standard hour-actual hour)*standard rate

labor effiency variance = (2040-2000)*13.50 = 540 F

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