Monitoring budgets. Control charts are used for a wide variety of applications in business. In the accounting area, control charts can be used to monitor budget variances. A budget variance is the difference between planned spending and actual spending for a given time period. Often budget variances are measured in percents. For improved budget planning, it is important to identify unusual variances on both the low and high sides. The data file for this exercise includes variance percents for 40 consecutive weeks for a manufacturing work center.

DATADATA DATADATADATA DATADATADATADATADATA DATADATADATADATADATA DATADATADATADATADATA DATADATADATADATADATA DATADATADATADATADATA DATADATADATADATADATA DATADATADATA DATADATADATADATADATA DATA FILE BUDGET

(a) Construct an I chart for the variance percents. Report the lower and upper control limits. Identify any observations that are outside the control limits.

(b) Apply the runs rule based on nine consecutive observations being on one side of the center line. Is there an out-ofcontrol signal based on this rule? If so, what are the associated observations?

(c) Remove all observations associated with out-of-control signals found in parts

(a) and (b). Reestimate the control limits and apply them to the remaining observations. Are there any more out-of-control signals? If so, identify them and remove them and reestimate limits. Continue this process until no out-of-control signals are present. Report the final control limits to be used for future monitoring.