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 4,000 of these meals using 960 direct labor-hours. The company paid its direct labor workers a total of $19,200 for this work, or $20.00 per hour.

According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $19.75 per hour.

Required:

1. What is the standard labor-hours allowed (SH) to prepare 4,000 meals?

2. What is the standard labor cost allowed (SH × SR) to prepare 4,000 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.)

Answer 1

1)	Standard labor hours allowed
	4000*.25
	1000	hrs	answer
2)	Standard labor cost allowed
	1000 hrs *$19.75
	19750
3)	labor spending variance
	19200- 19750
	550	F
4)	labor rate variance
	(Actual rate - standard rate)*actual hours
	(20 -19.75)*960
	240	U
	labor Efficiency variance
	(Actual hours - standard hrs allowed)*Standard rate
	(960 -1000)*19.75
	790	F