Discussion
Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R) :
Assertion (A) : Variance analysis is undertaken for planning and control of costs.
Reason (R) : Future costs are taken into consideration in budgeting and standard costing. In the above two statements, which one alternative of the following is correct ?
Codes :
Answer: B
Both statements are correct, but the reason is not the explanation. Variance analysis is undertaken for planning and control of costs, by comparing actual cost with the standard, and future costs are considered in budgeting and standard costing. But the reason describes how the standards are set and not why variance analysis is done, as variance analysis looks at the past performance against those standards. So option B is correct. The standard is fixed before the period and the variance is found after it, so the two statements sit at different times.
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