The Production Manager of a Company Was Experiencing High Defect

question 27

Multiple Choice

The production manager of a company was experiencing high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided recruit some highly skilled production workers from another company to bring down the defect rate, but he was worried that the higher wages of these workers might negatively impact operating income. This situation could have produced which of the following variances?

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

---

Definitions:

Taxable Income

The amount of an individual's or a company's income used to determine how much tax is owed, after deductions and exemptions.

Social Security Tax Rate

The rate at which income is taxed to fund the Social Security program, which provides retirement, disability, and survivorship benefits.

Paid Vacation

Employer-provided benefit that offers employees paid time off from work, allowing them personal time while still receiving their usual compensation.

Health Insurance

Insurance coverage that pays for medical and surgical expenses incurred by the insured, often provided by employers or purchased individually.