What is the primary purpose of using variances in budgeting and performance measurement?

• A. To assign blame
• B. To identify controllable factors and guide corrective actions
• C. To forecast exact future results
• D. To replace budgeting

Answer: (B)

Variances are used to see where actual results diverge from what was planned and to highlight which differences managers can influence. By breaking the gap into controllable factors such as price, efficiency, and usage, variances pinpoint where performance deviated and why. That clarity guides corrective actions—adjusting operations, negotiating better prices, improving processes, or updating standards and budgets for the future—so management can improve future performance. It isn’t about assigning blame, forecasting exact future results, or replacing the budgeting process; its main purpose is to aid ongoing control and improvement by focusing attention on controllable drivers of performance.