Direct Labor Variance - AirMeals Inc
AirMeals Inc prepares 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 prepared 6,000 of these meals using 1,150 direct labor hours. The company paid these direct labor 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 .20 direct labor hours at a cost of $9.50 per hour.
1. What direct labor cost should have been incurred to prepare 6,000 meals? How much does this differ from the actual direct labor cost?
2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance.