Which situation would likely require management by exception?

Management by exception is a control management technique that focuses on significant deviations from expected performance, allowing managers to concentrate on the most critical issues without getting bogged down in minor variances. The situation requiring this method usually pertains to instances where actual results significantly deviate from budgeted figures.

In this context, option B is correct because it highlights the importance of addressing unfavorable variances that exceed a certain threshold. By focusing on these discrepancies, management can identify potential problems or areas where the company is underperforming and direct resources and attention to those specific issues. This approach helps enhance efficiency, optimize decision-making, and effectively allocate managerial resources, ensuring that time is not wasted on variances that do not have a substantial financial impact.

In contrast, the other scenarios would not effectively utilize management by exception. Analyzing all favorable variances does not require as much management intervention since they are positive outcomes, and regular financial reporting periods or treating all variances equally would lead to a diluted focus, making it harder to address the most pressing issues facing the organization.