ELM Introduced a New Automated Production Process That Has Reduced

question 63

Multiple Choice

ELM introduced a new automated production process that has reduced the amount of labour needed, but not affected the use of materials. The standard cost system has not been changed yet to reflect this new process. Assuming the machinery is functioning properly and that workers were properly trained in its use, which of the following variances is most likely to result?

• A) Favorable variable overhead spending variance
• B) Favorable direct labor efficiency variance
• C) Unfavorable direct labor efficiency variance
• D) Favorable direct materials price variance

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Definitions:

Flexible Manufacturing

A production approach allowing for the quick adjustment of operations and products to respond to market changes or customer demands efficiently.

Lean Production

An organized approach to reducing waste in a manufacturing system while maintaining production levels.

Value Chain Analysis

Value Chain Analysis is a process of examining the development of competitive advantage, focusing on the chain of activities involved in designing, producing, marketing, delivering, and supporting a product or service.

Effective

Achieving the desired outcome or result with optimal use of resources and time.