A Company's Production Department Was Experiencing a High Defect Rate

question 2

Multiple Choice

A company's production department was experiencing a high defect rate on the assembly line,which was slowing down production and causing a higher waste of valuable direct materials.The production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate.This would produce a(n) ________.

• A) unfavorable direct materials cost variance
• B) unfavorable direct labor cost variance
• C) unfavorable direct labor efficiency variance
• D) unfavorable direct materials efficiency variance

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Definitions:

Fixed Costs

Invariable expenditures that remain steady irrespective of the quantity of output or sales achieved, including tenancy charges, payroll, and insurance outlays.

Operating Cash Flow

The total money yielded from a company's standard business operations.

Net Income

The resulting earnings of a business after deducting all expenses and taxes from its total revenue.

Net Working Capital

Represents the difference between a company's current assets and current liabilities, highlighting its short-term financial health and ability to cover its obligations.