Exercise 8-5 Direct Labor Variances [LO5]

AirMeals, Inc., prepares in-flight meals for a number of major airlines. One of the companys products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company prepared 7,000 of these meals using 2,060 direct labor-hours. The company paid these direct labor workers a total of $20,085 for this work, or $9.75 per hour.

According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $9.50 per hour.

Required:
1a.	According to the standards, what direct labor cost should have been incurred to prepare 7,000 meals?

Total standard direct labor cost

$

1b.

How much does this differ from the actual direct labor cost? (Input the amount as a positive value. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Round your answer to the nearest whole number.)

Spending variance

$

(Click to select)NoneFU

2.

Break down the difference computed in (1) above into a labor efficiency variance and a labor rate variance. (Input all amounts as positive values. Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.)

Labor efficiency variance	$	(Click to select)NoneFU
Labor rate variance	$	(Click to select)NoneFU

rev: 12_23_2013_QC_42932, 03_22_2014_QC_47112, 04_25_2014_QC_48873