CONTROL LIMITS, VARIANCE INVESTIGATION The management of Golding Company has determined that the cost to investigate a variance produced by its standard cost system ranges from $2,000 to $3,000. If a problem is discovered, the average benefit from taking corrective action usually outweighs the cost of investigation. Past experience from the investigation of variances has revealed that corrective action is rarely needed for deviations within 8 percent of the standard cost. Golding produces a single product, which has the following standards for materials and labour: Direct materials (8 kg $0.25) Direct labour (0.4 hr. $7.50) Actual production for the past three months with the associated actual usage and costs for materials and labour follow. There were no $2 beginning or ending May raw material inventories. April June Production (units) 90,000 100,000 110,000 Direct materials: Cost S189,000 S218,000 S230,000 Usage (kg) 723,000 885.000 870,000 Direct labour: Cost S270,000 36,000 $323,000 $360,000 46,000 Usage (kg) 44,000 Required: What upper and lower control limits would you use for materials variances? For labour variances? Compute the materials and labour variances for April, May, and June identify those that would require investigation CONTROL LIMITS, VARIANCE INVESTIGATION The management of Golding Company has determined that the cost to investigate a variance produced by its standard cost system ranges from $2,000 to $3,000. If a problem is discovered, the average benefit from taking corrective action usually outweighs the cost of investigation. Past experience from the investigation of variances has revealed that corrective action is rarely needed for deviations within 8 percent of the standard cost. Golding produces a single product, which has the following standards for materials and labour: Direct materials (8 kg $0.25) Direct labour (0.4 hr. $7.50) Actual production for the past three months with the associated actual usage and costs for materials and labour follow. There were no $2 beginning or ending May raw material inventories. April June Production (units) 90,000 100,000 110,000 Direct materials: Cost S189,000 S218,000 S230,000 Usage (kg) 723,000 885.000 870,000 Direct labour: Cost S270,000 36,000 $323,000 $360,000 46,000 Usage (kg) 44,000 Required: What upper and lower control limits would you use for materials variances? For labour variances? Compute the materials and labour variances for April, May, and June identify those that would require investigation