Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 23

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 their trucks, Jose O'Brien's Mobile Fiesta, specializes in Irish-Mexican fusion cuisine. The truck offers a single menu item which changes daily. On November 11, the truck prepared 200 of its most popular item, the Irish Breakfast Enchiladas. The following data are available for that day:

a. Determine the direct labor rate variance, direct labor time variance, and the total direct labor cost variance.
b. Discuss what might have caused these variances.