What kind of variance is primarily caused by theft?

The correct answer is inventory variances, as these variances specifically relate to discrepancies in inventory levels compared to what is expected or recorded. When theft occurs, it directly affects the amount of inventory a company has on hand. The value of the stolen items represents a loss that is not reflected in the accounting records; hence, this discrepancy creates variance in the inventory account.

Inventory variances involve any differences between the recorded inventory values and the actual inventory present. Theft results in a lower physical count of inventory, leading to a variance that can significantly impact a business's financials. This encompasses not just the value of the missing items but also potential losses in sales revenue and impacts on cost of goods sold.

In contrast, other types of variances—like usage, labor, and expense variances—do not relate directly to the physical loss of inventories caused by theft. Usage variances deal with the efficiency of resources consumed, labor variances relate to employee performance and wage discrepancies, and expense variances focus on the differences between budgeted and actual expenditure. Each of these addresses different aspects of a business's financial performance and does not account for inventory discrepancies due to theft.