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Which of the following statement(s) is/are true regarding planning and operational variances?
(1) Planning and operational variances are calculated when it is necessary to assess a manager on results that are within his/her control.
(2) Revised standards are required because variances may arise partly due to an unrealistic budget, and not solely due to operational factors.
(1) only
(2) only
C Neither (1) nor (2)
D Both (1) and (2)
Why the option 1 is true .
Planning variance is outside the control of manager
Can You explain me this one clearly sir ?
I want clear explaination sirPlanning variances are considered outside a manager’s control because they typically arise from external factors or decisions made prior to the operational phase.
Resulting from changes in market conditions, such as increases in material costs or labour rates, which the manager cannot influence.Also, if the original budget was unrealistic or based on incorrect assumptions, the resulting variances are not a reflection of the manager’s performance in their operational role.
Therefore, while managers may be involved in the budgeting process, they should not be held accountable for variances that stem from factors beyond their control.
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