Introduction to Variance Analysis & Performance Evaluation

Understanding Variance Analysis

Variance analysis compares actual financial and operational results with planned or budgeted expectations. Performance evaluation uses these variances along with financial and nonfinancial measures to assess how effectively managers and business units achieve organizational objectives.

For CPA BAR candidates, variance analysis is a fundamental management accounting tool that supports planning, cost control, operational improvement, and strategic decision-making.

• Measure actual performance against plans.
• Identify operational strengths and weaknesses.
• Support management decision-making.
• Improve budgeting accuracy.
• Promote continuous business improvement.