1. 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:

   June	$330,500		September	$314,000
   July	344,000		October	332,000
   August	346,800		November	323,000

   Required:

   1. Calculate the variance from standard for each month.

   	Variance
   June	$
   July	$
   August	$
   September	$
   October	$
   November	$

   Which months should be investigated?

   June
   July
   August
   September
   October
   November

   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?

   June
   July
   August
   September
   October
   November