AirCooks, Inc. prepares in-flight meals for a number of major airlines. One of the companys products is
Question:
AirCooks, Inc. prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with new baby potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals using 960 direct labour-hours. The company paid these direct labourers a total of $9,600 for this work, or $10 per hour.
According to the standard cost card for this meal, it should require 0.25 direct labour-hours at a cost of $9.75 per hour.
Required:
1. How many hours should have been used and what direct labour cost should have been incurred to prepare the 4,000 meals? How much does this cost vary from what was incurred? What is this variance called?
2. Break the difference computed in part (1) into a labour rate variance and a labour efficiency variance.
Step by Step Answer:
Introduction to Managerial Accounting
ISBN: 978-1259105708
5th Canadian edition
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan