Final answer:
The purpose of variances is to isolate planning and control, which helps managers understand the differences between planned and actual performance, and identify factors affecting profitability. This falls under the practice of variance analysis in management accounting.
Step-by-step explanation:
The purpose of variances is to isolate planning and control. This concept falls under the management accounting practice of variance analysis, where variances are the differences between planned, budgeted, or standard costs and revenue, and the actual results realized. The correct answer to the question is c) Planning; Control.
Variance analysis is used to evaluate performance by analyzing the deviations of actual results from budgets or standards. Specifically, planning variances can help in understanding the differences arising from changes in planned activity levels or changes to the cost-and-revenue structure during the planning phase. On the other hand, control variances refer to the differences that come up as a result of actual performance differing from planned performance, indicating how well the business controlled its operations.
By isolating these variances, managers can understand what factors are influencing profitability, determine whether these factors are within the business's control, and make informed decisions on how to improve efficiency and effectiveness.