In a manufacturing organization, an increase of 5% in the labor cost may be more troublesome than a 15% increase in the postal charges.'

Which kind of deviation analysis is mentioned in the above example?

Critical Point control

The correct answer is option 1- Critical Point control.

Critical Point control focuses on identifying and managing deviations that have a significant impact on the organization’s performance. In this case, the increase in labor cost is considered more troublesome than the increase in postal charges because labor costs have a larger impact on overall production costs and profitability. This highlights the focus on controlling critical points that have a substantial effect on financial performance.

Critical Point Control: It is neither economical nor easy to keep a check on each and every activity in an organisation. Control should, therefore, focus on key result areas (KRAs) which are critical to the success of an organisation. These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organisation suffers. For instance, in a manufacturing organisation, an increase of 5 percent in the labour cost may be more troublesome than a 15 percent increase in postal charges.