University of The Cumberlands Odessa Company Problems

Question Description

I’m working on a accounting question and need guidance to help me learn.

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 FFebruary 960 UMarch 860 UApril 1,060 UMay 1,210 UJune 1,790 UThe 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:2-a. Determine the cutoff 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.2-b. Based on the cutoff value, which month will have its direct-labor efficiency variance investigated?

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