Required Information EX 10-28 (Algo) Cost Variance Investigation (LO 10-4) 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 March April May June $ 270 F 820 U 729 U 920 U 1,070 U 1,300 U The standard direct-labor cost during each of these months was $21,000. The controller has estimated that the firm's monthly direct-labor variances have a standard deviation of $970. 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 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 28 Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 6 percent of standard cost. Cutoff value Reg 2A Req 2B >
Required Information EX 10-28 (Algo) Cost Variance Investigation (LO 10-4) 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 March April May June $ 270 F 820 U 729 U 920 U 1,070 U 1,300 U The standard direct-labor cost during each of these months was $21,000. The controller has estimated that the firm's monthly direct-labor variances have a standard deviation of $970. 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 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 28 Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater than 6 percent of standard cost. Cutoff value Reg 2A Req 2B >
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 21E: Madison Company uses the following rule to determine whether direct labor efficiency variances ought...
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Transcribed Image Text:Required Information
EX 10-28 (Algo) Cost Variance Investigation (LO 10-4)
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
March
April
May
June
The standard direct-labor cost during each of these months was $21,000. The controller has estimated that the firm's
monthly direct-labor variances have a standard deviation of $970.
EX 10-28 (Algo) Part 2: Which varlances will be investigated?
$ 270 F
820 U
720 U
920 U
1,070 U
1,300 U
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 6
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
Cutoff value
Determine the cutoff value for investigation if the controller's rule of thumb is to investigate all variances equal to or greater
than 6 percent of standard cost.
Req 2A
Req 2B >
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