Answer :
To determine the variance range for a budget estimate of $2M, let's understand what variance means in this context. Variance in budgeting refers to the amount by which a budget estimate can realistically fluctuate from the planned amount. It gives a range in which the budget is expected to vary based on different factors like market conditions, risk assessment, or potential for unforeseen expenses.
Given the budget estimate of $2M, we need to find the option that represents a reasonable and practical range around this estimate that captures possible deviations.
Option (A) $1M–$3M: This range suggests a potential deviation of up to $1M in both directions, indicating a wide variance which might not be typical for precise budgeting estimates.
Option (B) $1.8M–$2.5M: This range suggests a narrower and potentially more accurate variance, with deviations of $0.2M below and $0.5M above the estimate, which is a practical range for many budget scenarios.
Option (C) $1.95M–$2.2M: This range suggests a very tight variance, with minimal room for flexibility ($0.05M below and $0.2M above), which could be feasible for very controlled budget situations.
Option (D) $1.5M–$2.5M: This range offers a moderate variance, with deviations of $0.5M below and $0.5M above, providing a balanced level of flexibility.
Considering these options, the most realistic variance range for a budget estimate, assuming some level of standard uncertainty or potential deviation, is Option (D) $1.5M–$2.5M. This option provides a practical middle ground between flexibility and precision, acknowledging the potential for both cost savings and overruns without being overly conservative or overly risky in assumptions.
