A standard is not a single measure but rather a range of acceptable input quantities, costs, output quantities, or prices. Often, a variance within an acceptable range is considered to be an “in-control occurrence” and calls for no investigation or action. So how do managers decide when to investigate variances? They use subjective judgments or rules of thumb. For critical items such as product defects, even a small variance can prompt an investigation. For other items such as direct material costs, labor costs, and repair costs, companies generally have rules such as “investigate all variances exceeding $5,000 or 20% of the budgeted cost, whichever is lower.” Why? Because a 4% variance in direct materials costs of $1 million—a $40,000 variance—deserves more attention than a 15% variance in repair costs of $10,000—a $1,500 variance. In other words, variance analysis is subject to the same cost–benefit test as all other phases of a management control system.