Question

Which of the following statements about management by exception is incorrect?

A) Managers concentrate on results that are outside the accepted parameters.
B) There is no need to investigate variances that are less than 10%.
C) Exceptions can be expressed as a percentage of a budgeted amount or a dollar amount.
D) Many companies use a combination of percentages and dollar amounts.

Answer 1

The incorrect statement about management by exception is that there's no need to investigate variances under 10%, as the threshold for exception can vary by organization.

Step-by-step explanation:

The statement about management by exception that is incorrect is B) There is no need to investigate variances that are less than 10%. This approach to management focuses on identifying and addressing the areas where performance deviates significantly from the standards or expectations, but the threshold for what constitutes an exception is not necessarily set at 10%. Each organization may set different thresholds based on the significance and risk tolerance related to specific variances.

Managers using this approach concentrate on the most significant issues indicated by the exceptions. These exceptions can indeed be expressed as a percentage of a budgeted amount or in dollar amounts. Moreover, organizations often use a combination of both percentages and dollar amounts when implementing management by exception to ensure efficient resource usage and attention to critical areas of operations.