Why do variances have little meaning until their causes are identified?
A)Because they cannot be calculated correctly until the causes are known
B)Because identifying their causes allows managers to take correct action
C)Because identifying their causes will immediately increase net income
D)Because identifying their causes will immediately decrease net income

Question

Quizplus · Accepted Answer

Variances are simply just deviations from the expected outcome, and without identifying their underlying causes, it is difficult for managers to take any appropriate action that addresses their root causes. Only when the reasons for a variance are understood, can strategies be developed to remedy the problem, which can lead to positive outcomes such as increasing net income. Therefore, option B is the best choice.

Why Do Variances Have Little Meaning Until Their Causes Are