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 160 of its most popular item, the Breakfast Enchilada. The following data are available for that day:

Quantity of direct labor used	24 hrs.
(3 employees, working 8 hour shifts)
Actual rate for direct labor	$17.20 per hr.
Standard direct labor per meal	0.1 hr.
Standard rate for direct labor	$17.70 per hr.

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

1. 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 the nearest cent.

   Direct Labor Rate Variance		$fill in the blank 2	Favorable
   Direct Labor Time Variance		$fill in the blank 4	Unfavorable
   Direct Labor Cost Variance		$fill in the blank 6	Unfavorable

2. Discuss what might have caused these variances.

   Unfavorable time variance will occur any time the number of meals actually made falls below the minimum number of meals that could be generated by employees in the mobile kitchen.