Investigation of Variances
Sommers Company uses the following rule to determine whethermaterials usage variances should be investigated: A materials usagevariance will be investigated anytime the amount exceeds the lesserof $12,000 or 10% of the standard cost. Reports for the past fiveweeks provided the following information:
Week
MUV
Standard Materials Cost
1
$10,500 F
$120,000
2
10,700 F
100,500
3
9,000 U
120,000
4
13,500 U
127,500
5
10,500 U
103,500
Required:
Using the rule provided, identify the cases that will beinvestigated.
Week 1
Week 2
Week 3
Week 4
Week 5
choices for each week:
Will not be investigated
Will be investigated because it exceeds the 10% ruleonly
Will be investigated because it exceeds the $12,000rule only
Will be investigated because it exceeds both the 10%rule and the $12,000 rule
Will be investigated because it exceeds both the 10%rule and the $12,000 rule
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