AquaMarine Company's standard cost is $750,000.The allowable deviation is ±5%.Its actual costs for three months are as follows:
The upper and lower control limits are, respectively, _____.
A) $712,500 and $643,500
B) $684,200 and $557,000
C) $787,500 and $712,500
D) $742,000 and $670,000

Question

AquaMarine Company's standard cost is $750,000.The allowable deviation is ±5%.Its actual costs for three months are as follows:
 The upper and lower control limits are, respectively, _____.
A) $712,500 and $643,500 
B) $684,200 and $557,000 
C) $787,500 and $712,500 
D) $742,000 and $670,000

Quizplus · Accepted Answer

The upper control limit = Standard cost + (Standard cost × Allowable deviation)
The upper control limit = [$750,000 + ($750,000 × 5%)] = $787,500
The lower control limit = Standard cost - (Standard cost × Allowable deviation)
The lower control limit = [$750,000 - ($750,000 × 5%)] = $712,500

AquaMarine Company's Standard Cost Is $750,000