The Production of a Company Was Experiencing a High Defect

question 51

Multiple Choice

The production of a company was experiencing a high defect rate on the assembly line,which was slowing down the production and causing wastage of valuable materials.The production manager decided to purchase a higher grade of material that would be more reliable,but he was worried that the cost of the new material might negatively affect operating income.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:

Taxable Temporary Difference

The difference between the tax base of an asset or liability and its carrying amount in the financial statements that will result in taxable amounts in future periods.

Deferred Tax Asset

An accounting term that refers to a situation where a company has paid more taxes to the government than it has shown as an expense in its financial statements, leading to future tax savings.

Deferred Tax Liability

A tax obligation that a company owes but is allowed to pay at a later date, often due to timing differences between accounting practices and tax laws.

Future Tax

Tax liabilities or assets that are expected to be realized in the future, typically as a result of temporary differences between the book and tax bases of assets and liabilities.