EXERCISE 113 Direct Labor Variances LO3 SkyChefs products is

EXERCISE 11-3 Direct Labor Variances (LO3] SkyChefs, 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 these direct labor workers a total of $9.600 Inc., prepares in-flight meals for a number of major airlines. One of the conm for this work, or $10.00 per hour According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.75 per hour Required: 1. What direct labor cost should have been incurred to prepare 4,000 meals? How much does this differ from the actual direct labor cost? 2. Break down the difference computed in (1) above into a labor rate variance and a labor effi- ency variance

Solution

1) Schedule :

4000 meals

2) Labour rate variance = (9.75-10)*960 = 240 U

Labour efficiency variance = (1000-960)*9.75 = 390 F

No of meals prepared	4000 meals
Standard labour hour per meal	0.25
Standard labour hour allowed	1000
Rate per hour	9.75
Standard labour cost	9750
Actual labour cost	9600
Total labour cost variance	150 F