# 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

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?

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?

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**Related Book For**

## Cornerstones of Cost Management

3rd edition

Authors: Don R. Hansen, Maryanne M. Mowen

ISBN: 978-1285751788