Process improvement on the labor efficiency variance

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Reference no: EM13918687

Jackson sound. Circuit dept. has improved and reduced production times from 12.5 standard labor hours to 10.4 Improvements have caused more production and a build-up of inventory passed on to the case dept. Workers bonuses are tied to standard cost performance. Company has no incentive to lay off workers if not needed. With production improvements and institution of new standards, (1) why does the circuit dept. have incentive to overproduce.(2) If circuit department does not overproduce, what is the effect of the process improvement on the labor efficiency variance?

Reference no: EM13918687

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