Jetrans Airlines operates daily round-trip flights on the LondonVancouver route using a fleet of three 747s: the
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Therefore the round-trip fuel consumption average is 200 litre-units, with a standard deviation of 20 litreunits. This is an example of the conference method of estimating costs using complex, but industry-appropriate, units.
Using a statistical quality control (SQC) approach, Shirley Watson, the Jetrans operations manager, investigates any round-trip with fuel consumption that is greater than two standard deviations from the mean. In October, Watson receives the following report for round-trip fuel consumption for the three planes on the LondonVancouver route:
REQUIRED
1. Using the 2Ï rule, what variance-investigation decisions would be made?
2. Present SQC charts for round-trip fuel usage for each of the three 747s in October. What inferences can you draw from the charts?
3. Some managers propose that Jetrans Airlines present its SQC charts in monetary terms rather than in physical-quantity terms (litre-units). What are the advantages and disadvantages of using monetary fuel costs rather than litre units in the SQC charts?
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
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