The production manager of a company was experiencing a high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided to recruit some highly skilled production workers from another company to bring down the defect rate, but was worried that the higher wages of these workers might negatively affect operating income. This situation would have produced 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 recruitment of highly skilled production workers is likely to have a positive impact on reducing defect rates, which should lead to a favorable direct labor efficiency variance. This means that the actual cost of labor should be less than the standard cost due to the increased productivity of the new workers. Since the question states that the defect rate is slowing production and causing wastage of valuable materials, it is less likely that the issue is related to materials cost or efficiency variances. Additionally, the question does not provide enough information to determine the impact on operating income from the higher wages of the new workers.

The Production Manager of a Company Was Experiencing a High