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

question 171

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

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Definitions:

Net Cash

The amount of cash remaining after all cash inflows and outflows have been accounted for over a specific period.

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and other investments, as part of the company's investment strategy.

Net Cash

The total amount of cash and cash equivalents a company possesses after deducting all liabilities, often used to assess its financial health.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of a company.