The production manager of a company was experiencing high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided recruit some highly skilled production workers from another company to bring down the defect rate, but he was worried that the higher wages of these workers might negatively impact operating income. This situation could have produced which of the following variances?

Question

Quizplus · Accepted Answer

Hiring highly skilled workers at higher wages directly impacts the labor cost, leading to an unfavorable labor price variance because the company is paying more per hour of labor than originally planned or budgeted.

The Production Manager of a Company Was Experiencing High Defect