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 4000 of these meals using 960 direct labor hours. The company paid these direct labor workers a total of $19,200 for this work, or $20.00 per hour. According to standard cost card for this meal, it should require 0.25 direct labour-hours at a cost of $19.75 per hour.1. What is the standard labor-hours allowed (SH) to prepare 4,000 meals?2. What is the standard labor cost allowed (SH x 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?

Answer 1

Answer:

1.- 4,000 x 0.25= 1,000

2.- 19.75 x 1,000 = 19,750

3.- 240 unfavorable

4.- 790 favorable  

Explanation:

DIRECT labor VARIANCES

$(standard\:rate-actual\:rate) \times actual \: hours = DL \: rate \: variance$

std rate  $19.75

actual rate  $20.00

actual hours 960

$(19.75 - 20.00) \times 960 = DL \: rate \: variance$

difference  $(0.25)

The difference is negative. The cost per hour is greater than expected. The variance is unfavorable.

extra 0.25 x 960 hours = rate variance  $(240.00)

$(standard\:hours-actual\:hours) \times standard \: rate = DL \: efficiency \: variance$

std  hours 1000.00  (1)

actual hours 960.00

std rate  $19.75

$(1000 - 960 ) \times 19.75 = DL \: efficiency \: variance$

difference 40.00

The difference is positive, the company used less hours to complete the meal. the variance is positive.

40 saved hours at $19.75 each = efficiency variance  $790.00

Answer 2

1. The standard labor-hours allowed to prepare 4,000 meals is 1,000.

2. The standard labor cost allowed to prepare 4,000 meals is $19,750.

3. The labor spending variance is $550 F.

4. The labor rate variance is $240 U.

The labor efficiency variance is $790 F.

1.  Standard labor-hours (SH)

Standard labor-hours=4000×0.25

Standard labor-hours=1,000

2.  Standard labor cost allowed (SH x SR)

Standard labor cost allowed = (4,000×0.25)×$19.75

Standard labor cost allowed =1,000×$19.75

Standard labor cost allowed  =$19,750

3. Labor spending variance

Labor spending variance=(1,000×$19.75)-(960×$20)

Labor spending variance=$19,750-$19,200

Labor spending variance=$550 F

4.  Labor rate variance and Labor efficiency variance

Labor rate variance = 960×($19.75 -20)

Labor rate variance =960×(-$.25)

Labor rate variance = $240 U

Labor efficiency variance=$19.75 ×(1,000-960)

Labor efficiency variance=$19.75 ×40

Labor efficiency variance= $790 F

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