Chapter 23, Problem 23.13EX

Direct labor variances for a service company

 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
(3 employees, working 8-hour shifts)	24 hrs.
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.

 b.    Discuss what might have caused these variances.