A Company Was Experiencing Slow Production Rates, and Lower Production

question 164

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 would have produced a(n) :

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

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Definitions:

Site Selection

The process of determining the best location for a business or facility based on various factors like demographics, costs, and regulatory environment.

Distribution Channel

The series of intermediaries a product passes through when going from producer to consumer.

Direct

Pertains to a straightforward or unmediated approach in marketing, selling, or communication, often involving direct interaction with customers or clients.

Site Selection

The process of choosing a new location for a business or facility based on criteria such as cost, logistics, market demand, and legal considerations.