The director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current year. January February $ 400 F 950 U March April May June 850 U 1,050 U 1,200 U 1,740 U The standard direct-labor cost during each of these months was $34,000. The controller has estimated that the firm's monthly direct-labor variances have a standard deviation of $1,100. EX 10-28 (Algo) Part 2: Which variances will be investigated? Required: 2-a. Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 5 percent of standard cost. 2-b. Based on the cutoff value, which month will have its direct-labor efficiency variance investigated? Complete this question by entering your answers in the tabs below. Req 2A Req 2B Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 5 percent of standard cost. Cutoff value < Req 2A Req 2B >
The director of cost management for Odessa Company uses a statistical control chart to help management determine when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor efficiency variances during the first six months of the current year. January February $ 400 F 950 U March April May June 850 U 1,050 U 1,200 U 1,740 U The standard direct-labor cost during each of these months was $34,000. The controller has estimated that the firm's monthly direct-labor variances have a standard deviation of $1,100. EX 10-28 (Algo) Part 2: Which variances will be investigated? Required: 2-a. Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 5 percent of standard cost. 2-b. Based on the cutoff value, which month will have its direct-labor efficiency variance investigated? Complete this question by entering your answers in the tabs below. Req 2A Req 2B Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 5 percent of standard cost. Cutoff value < Req 2A Req 2B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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vnt.85
Transcribed Image Text:The director of cost management for Odessa Company uses a statistical control chart to help management determine
when to investigate variances. The critical value is 1 standard deviation. The company incurred the following direct-labor
efficiency variances during the first six months of the current year.
January
February
$ 400 F
950 U
March
April
May
June
850 U
1,050 U
1,200 U
1,740 U
The standard direct-labor cost during each of these months was $34,000. The controller has estimated that the firm's
monthly direct-labor variances have a standard deviation of $1,100.
EX 10-28 (Algo) Part 2: Which variances will be investigated?
Required:
2-a. Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 5
percent of standard cost.
2-b. Based on the cutoff value, which month will have its direct-labor efficiency variance investigated?
Complete this question by entering your answers in the tabs below.
Req 2A
Req 2B
Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater
than 5 percent of standard cost.
Cutoff value
< Req 2A
Req 2B >
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