The production manager of a company,in an effort to gain a promotion,negotiated a new labor contract with the factory employees that required them to bear a greater percentage of benefit costs than before,thus bringing down the cost of direct labor to the company.Shortly afterward,several experienced and highly skilled workers resigned,and were replaced by new employees whose work was very slow during their training period.At the end of the quarter,the company's profits fell 10%.This would produce a(n)________.
A) unfavorable direct materials cost variance
B) favorable direct labor cost variance
C) favorable direct labor efficiency variance
D) unfavorable direct materials efficiency variance

Question

Quizplus · Accepted Answer

The negotiation of a new labor contract that required employees to bear a greater percentage of benefit costs would directly lead to a reduction in the cost of direct labor to the company, resulting in a favorable direct labor cost variance. This is because the company is spending less on direct labor than before, which is considered favorable from a cost perspective.

The Production Manager of a Company,in an Effort to Gain