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

The decision to recruit highly skilled production workers is aimed at reducing defects, which can be attributed to labor efficiency. Therefore, the resulting variance is likely to be a favorable labor efficiency variance. The other options are not relevant in this situation.

The Production Manager of a Company Was Experiencing High Defect