Hit-n-Run Food Trucks, Inc., owns and operates food trucks (mobile kitchens) throughout the west coast. The company’s employees have varying wage levels depending on their experience and length of time with the company. Employees work eight-hour shifts and are assigned to a truck each day based on labor needs to support the daily menu. One of the trucks, Jose O’Brien’s Mobile Fiesta, specializes in Irish-Mexican fusion cuisine. The truck offers a single menu item that changes daily. On November 11, the truck prepared 200 of its most popular item, the Irish 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 $15.00 per hr. Standard direct labor per meal 0.1 hr. Standard rate for direct labor $15.50 per hr. a. Determine the direct labor rate variance, the direct labor time variance, and the 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. Rate variance $fill in the blank 1 Time variance $fill in the blank 3 Total direct labor cost variance $fill in the blank 5 b. Discuss what might have caused these variances. a. The time taken to prepare the meals was much higher than the budgeted time. b. The number of meals that can be actually made by the staff is less than the number of meals that could be generated by the employees assigned. c. The actual cost of the labor is higher than the standard cost.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Hit-n-Run Food Trucks, Inc., owns and operates food trucks (mobile kitchens) throughout the west coast. The company’s employees have varying wage levels depending on their experience and length of time with the company. Employees work eight-hour shifts and are assigned to a truck each day based on labor needs to support the daily menu. One of the trucks, Jose O’Brien’s Mobile Fiesta, specializes in Irish-Mexican fusion cuisine. The truck offers a single menu item that changes daily. On November 11, the truck prepared 200 of its most popular item, the Irish 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 | $15.00 per hr. |
| Standard direct labor per meal | 0.1 hr. |
| Standard rate for direct labor | $15.50 per hr. |
a. Determine the direct labor rate variance, the direct labor time variance, and the 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.
| Rate variance | $fill in the blank 1 |
|
| Time variance | $fill in the blank 3 |
|
| Total direct labor cost variance | $fill in the blank 5 |
|
b. Discuss what might have caused these variances.
a. The time taken to prepare the meals was much higher than the budgeted time.
b. The number of meals that can be actually made by the staff is less than the number of meals that could be generated by the employees assigned.
c. The actual cost of the labor is higher than the
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