A Company Was Experiencing Slow Production Rates, and Lower Production

question 153

Multiple Choice

A company was experiencing slow production rates, and lower production volumes than demanded by management, so a new factory manager was hired. Upon investigation, she found that the workers were poorly motivated and not closely supervised. Midway through the quarter, she started an incentive program and paid out cash bonuses when workers hit their production targets. Within a short time, production output increased, but the bonuses had to be charged to the direct labor budget, and she was worried about the impact of these costs on operating income. This situation could have produced which of the following variances?

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

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Definitions:

Growth Hormone

A hormone that stimulates growth, cell reproduction, and cell regeneration in humans and other animals.

Melatonin

Pineal gland hormone that regulates sleep–wake cycles and seasonal changes; secreted only in the dark.

Gonadotropin-Releasing Hormone

A hormone responsible for the release of follicle-stimulating hormone and luteinizing hormone from the anterior pituitary.

Anterior Pituitary

The front part of the pituitary gland responsible for releasing several key hormones, including growth hormone and ACTH.