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

question 112

Multiple Choice

The production manager of a company, in an effort to gain a promotion, negotiated a new labor contract with her 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 situation could have produced which of the following variances?

• A) Unfavorable materials price variance
• B) Favorable labor price variance
• C) Favorable labor efficiency variance
• D) Unfavorable materials efficiency variance

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Definitions:

Celler-Kefauver Act

An antitrust law in the United States that prohibits certain types of corporate mergers and acquisitions that could lessen competition.

Mergers

The combining of two or more companies into one entity, often to achieve market synergies, expand business operations, or increase competitiveness.

Antitrust Suit

Legal action taken to challenge business practices or mergers that are believed to harm competition in the market.

Sherman Act

A landmark federal statute in the antitrust law of the United States, passed in 1890, which prohibits monopolistic practices and promotes competition.