A company was experiencing slow production rates, and lower production volumes than demanded by management, so a new factory manager was hired. Upon investigation, she found that the workers were poorly motivated and not closely supervised. Midway through the quarter, she started an incentive program and paid out cash bonuses when workers hit their production targets. Within a short time, production output increased, but the bonuses had to be charged to the direct labor budget, and she was worried about the impact of these costs on operating income. This situation could have produced a(n):
A)unfavorable direct materials cost variance.
B)unfavorable direct materials efficiency variance.
C)favorable direct labor efficiency variance.
D)favorable direct labor cost variance.

Question

Quizplus · Accepted Answer

The incentive program likely motivated workers to be more efficient, leading to a favorable direct labor efficiency variance as they produced more output in less time.

A Company Was Experiencing Slow Production Rates, and Lower Production