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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 17
Using Control Limits to Determine When to Investigate a Variance
Kavallia Company set a standard cost for one item at $328,000; allowable deviation is ±$14,500. Actual costs for the past six months are as follows:
Required:
1. Calculate the variance from standard for each month. Which months should be investigated?
2. What if the company uses a two-part rule for investigating variances? The allowable deviation is the lesser of 4 percent of the standard amount or $14,500. Now which months should be investigated?
Kavallia Company set a standard cost for one item at $328,000; allowable deviation is ±$14,500. Actual costs for the past six months are as follows:
Required:
1. Calculate the variance from standard for each month. Which months should be investigated?
2. What if the company uses a two-part rule for investigating variances? The allowable deviation is the lesser of 4 percent of the standard amount or $14,500. Now which months should be investigated?
Explanation
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1.To calculate the variance, we need tak...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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