Which of the following statements is true with regard to variances requiring investigation?
i. Favourable variances do not need to be investigated.
ii. Large variances should be investigated.
iii. Consistent trends in variances should be investigated.
A) i
B) ii
C) i and ii
D) ii and iii

Question

Quizplus · Accepted Answer

Large variances should be investigated to identify the root cause, and consistent trends in variances should be investigated to determine if there is an underlying issue that needs to be addressed. Favourable variances should also be investigated to ensure that they are not the result of mismanagement or a faulty budget. Therefore, option ii and iii are correct. Option i is incorrect as favourable variances could be an indication of good performance or effective cost management, but it is still important to investigate them to ensure they are not due to errors or mismanagement.

Which of the Following Statements Is True with Regard to Variances