Variance analysis attempts to identify discrepancy between actual and planned results. Adverse/unfavourable variance should be investigated – determine cause i.e. inefficiency or external factor, Inefficiency could be caused by lack of motivation or inappropriate training. Steps should be taken to rectify issues. External factors, such as a downturn in market, are harder to accommodate. May be necessary to amend targets […]
Variance – difference between budgeted figure and actual figure. Usually at end of budget period. Can be favourable (F) or adverse (A). Favourable variances – actual figure is better than budgeted figure. Adverse variances – actual figures are worse than budgeted figures. Managers examine variances to determine how improvements can be made.