Direct Labor Variances for a Service Company

Mexicali On the Go Inc. owns and operates food trucks (mobile kitchens) throughout the west coast. The companys employees have varying wage levels depending on their experience and length of time with the company. Employees work 8-hour shifts and are assigned to a truck each day based on labor needs to support the daily menu. One of its trucks, Donnas Mobile Fiesta offers a single menu item that changes daily. On May 6, the truck prepared 70 of its most popular item, the Breakfast Enchilada. The following data are available for that day:

Quantity of direct labor used	16 hrs.
(2 employees, working 8-hour shifts)
Actual rate for direct labor	$15.40 per hr.
Standard direct labor per meal	0.2 hr.
Standard rate for direct labor	$16.00 per hr.

a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your answers to two decimal places.

Direct Labor Rate Variance	$
Direct Labor Time Variance	$
Total Direct Labor Cost Variance	$

b. Discuss what might have caused these variances.