Control chart
A control chart plots a measure such as a cost variance over time against upper and lower control limits, so managers can tell random common-cause fluctuation from a signal that is worth investigating.
FrameworkStatistical process control
See it move
A division's monthly labour cost variance averages €0 with a standard deviation of €400, giving control limits of plus or minus three standard deviations, or ±€1,200. In March the variance is an adverse €900, inside the band, so it is left alone. In April it widens to an adverse €1,350, breaching the €1,200 upper limit, which triggers an investigation into the cause.
Check yourself
A control chart for a material price variance has a centre line of €0 and control limits set at ±€900, based on three standard deviations where the standard deviation is €300. This month's material price variance is an adverse €750. Should it be investigated?