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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Control Limits

During the last 6 weeks, the actual costs of materials for Brennen Company were as follows:

Chapter 10, Problem 22BEA, Control Limits During the last 6 weeks, the actual costs of materials for Brennen Company were as

The standard materials cost for each week was $60,000 with an allowable deviation of ±6,000.

Required:

Plot the actual costs over time against the upper and lower limits. Comment on whether or not there is a need to investigate any of the variances.

Use the following information to complete Brief Exercises 10-23 and 10-24:

Krumple Inc. produces aluminum cans. Production of 12-ounce cans has a standard unit quantity of 4.7 ounces of aluminum per can. During the month of April, 450,000 cans were produced using 1,875,000 ounces of aluminum. The actual cost of aluminum was $0.10 per ounce and the standard price was $0.08 per ounce. There are no beginning or ending inventories of aluminum.

To determine

Chart actual cost incurred overtime against the upper and lower limit. Explain if variances need to be investigated.

Explanation

Control Limits:

The control limits can be defined as the bottom measures and top measures of the allowable range. It helps the manager in the investigation when the variance falls outside the limit of acceptable range, so corrective action can be taken..

The chart of actual cost incurred overtime against upper and lower limit is as follows:

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