A New Factory Manager Was Hired for a Company That

question 170

Multiple Choice

A new factory manager was hired for a company that was experiencing slow production rates,and lower production volumes than demanded by management.Upon investigation,the manager found that the workers were poorly motivated and not closely supervised.Midway through the quarter,an incentive program was initiated and cash bonuses were given 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,but the manager was worried about the impact of these costs on operating income.This situation could have produced a(n) ________.

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

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Definitions:

Returns To Scale

Describes how output changes in response to a proportional change in all input factors used in production.

Production Function

This concept illustrates how varying amounts of input factors affect the level of production output, showcasing how efficiency can be maximized with certain combinations of inputs.

Output

The quantity of goods or services produced in a given time period by a firm, industry, or country.

Production Function

A mathematical model that describes the relationship between input resources and the output of goods or services produced.