Variance Analysis
Comparing Actual Results with Budget
Variance analysis compares actual results with budgeted amounts to identify differences requiring management attention. Favorable variances improve profitability, while unfavorable variances indicate areas requiring investigation.
- Revenue variances
- Expense variances
- Volume variances
- Price variances
- Efficiency variances
Note
Not all unfavorable variances are negative; some result from strategic investments or changing business conditions.
Summary
Variance analysis supports performance evaluation and continuous operational improvement.