Assertion: Management by Exception involves reporting of exceptional deviation between actual performance and standard performance to top management.

Reasoning: Controlling performance in critical areas is critical point control.

Assertion (A) is true but Reasoning (R) is not correct.

The correct answer is: Option 3: Assertion (A) is true but Reasoning (R) is not correct.

Assertion (A) is true: Management by Exception (MBE) focuses on identifying and addressing significant deviations from planned performance. It promotes efficiency by allowing managers to concentrate on exceptions rather than micromanaging routine tasks.

Reasoning is NOT Correct: Controlling performance in Key result areas (not critical areas as mentioned in the question) is critical point control.

Management by Exception: Management by exception, which is often referred to as control by exception, is an important principle of management control based on the belief that an attempt to control everything results in controlling nothing. Thus, only significant deviations which go beyond the permissible limit should be brought to the notice of management. Thus, if the plans lay down 2 per cent increase in labour cost as an acceptable range of deviation in a manufacturing organisation, only increase in labour cost beyond 2 per cent should be brought to the notice of the management.