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

question 74

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 would have produced a(n) :

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