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Are the following statements about variances true or false?
Any operational variances arising should be a realistic measure of what the causes of the variances have cost the business.
The causes of the planning variances should not be investigated immediately by the operational manager in the business.
What does the first statement mean and why is it true or false?
For the second statement, I think the causes of the planning variances should be investigated immediately by the operational manager and therefore the second statement is false. While the book also mentions false as the correct answer for statement 2, but at the same time it is mentioned that the causes of the planning variances should not be investigated immediately by the operational manager. So on one hand the second statement has been regarded as false, and on the other hand the book says that planning variances should not be investigated immediately. So the answer false is contrary to what the explanation is in the book.
For there to be an operational variance, something must have changed in the way things were operating. The variance should measure how much these changes have cost the company.
So the first statement is true.The operational manager is responsible for the operating variances. They are not responsible for the planning variances. So although planning variances should be investigate by somebody, it is not for the operational manage to investigate them immediately – the operational manager should be investigating the operational variances immediately.
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