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) favorable direct materials cost variance
B) unfavorable direct labor cost variance
C) unfavorable direct labor efficiency variance
D) favorable direct materials efficiency variance

Question

Quizplus · Accepted Answer

The negotiated labor contract resulted in lower direct labor costs for the company, which could have resulted in a favorable direct labor cost variance. However, the loss of experienced and skilled workers and the slower work of the new employees led to lower production efficiency, resulting in an unfavorable direct labor efficiency variance. It is important to note that the options A and D are related to direct materials cost and efficiency variances, which are not relevant to this scenario.

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