SkyInc provides in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company made 6,000 of these meals, actually using 1,150 direct labour-hours. The company actually paid these direct labour workers a total of $11,500 for this work, or $10 per hour. According to the standard cost card for this meal, it should require 0.20 direct labour hours at a cost of $9.50 per hour. Required: 1. Break down the difference computed in (1) above into a labour rate variance and a labour efficiency variance. Part 1 AH x AR AH x SR SH x SR RATE VARIANCE EFFICIENCY VARIANCE TOTAL LABOUR VARIANCES

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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SkyInc provides in-flight meals for a number of major airlines. One of the company’s products is stuffed cannelloni with roasted pepper sauce, fresh baby corn, and spring salad. During the most recent week, the company made 6,000 of these meals, actually using 1,150 direct labour-hours. The company actually paid these direct labour workers a total of $11,500 for this work, or $10 per hour.

According to the standard cost card for this meal, it should require 0.20 direct labour hours at a cost of $9.50 per hour.

Required:

1. Break down the difference computed in (1) above into a labour rate variance and a labour efficiency variance.

Part 1

RATE VARIANCE

EFFICIENCY VARIANCE

TOTAL LABOUR VARIANCES

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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