The purpose of periodically comparing revenues and costs in a cost analysis is to identify:

• A. Errors in data entry
• B. Variances and necessary adjustments
• C. New revenue streams
• D. Regulatory compliance issues

Answer: (B)

The main idea being tested is using actual results versus expectations to spot what didn’t go as planned. By periodically comparing actual revenues and costs to the budget or standard costs, you reveal variances—differences between what was expected and what occurred. Those variances show where performance diverged, whether due to pricing, volume, efficiency, waste, or input costs, and they point to what needs to be adjusted. This process supports cost control and better decision making, such as updating forecasts, revising budgets, or changing operations to bring costs back in line with goals. While data-entry mistakes could show up as variances, the primary purpose is to identify the differences and determine the necessary adjustments to improve financial performance.