Determine the cut-off value for investigation

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Reference no: EM133207325

Assignment - Odessa Company Problems - 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 $410 F

February 960 U

March 860 U

April 1,060 U

May 1,210 U

June 1,790 U

The standard direct-labor cost during each of these months was $35,000. The controller has estimated that the firm's monthly direct-labor variances have a standard deviation of $1,110.

Required -

a. Determine the cut-off 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.

b. Based on the cut-off value, which month will have its direct-labor efficiency variance investigated?

Reference no: EM133207325

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