Corporate managers at Greasy Grimes began collecting data from each service center to analyze material price and quantity variances. Some managers are concerned that too much is being paid for materials and too many materials are being used in conducting repairs. Managers collected quantity data from the past 12 months to use as a comparison with the variance figures for July of the current year:

\section*{Required}
A. Construct a statistical process control chart for material quantity variances. In calculating the process average, treat favorable variances as positive values and unfavorable variances as negative values.
1. Calculate the process average for the 12 months listed.
2. Place the upper control limit at \(+\$ 1,875\).
3. Place the lower control limit at \(-\$ 1,825\).
4. Plot the material quantity variances for the past 12 months.
B. Calculate the material price and quantity variances for July of this year and add the quantity variance to your statistical process control chart.
C. Is the process in statistical control? Should managers investigate this July's material quantity variance for special causes? Explain.

Transcribed Image Text:

July Material Price and 12-Month Material Quantity Variance Data Quantity Data Jul. $1,000 F Jan. $350 F Actual price Aug. 1,000 U Feb. 400 F Actual quantity Sep. 500 F Mar. 250 F Oct. 750 F Apr. 300 U Standard price Standard quantity Nov. 800 U May 250 U Dec. 750 U Jun. 150 F $200 25 $190 23