Back to results for “The Budgeting Process”
Budgeting & Forecasting › Variance Analysis

What is variance analysis?

Beginner

Answer

Variance analysis is the process of comparing actual results with budgeted or standard figures, calculating the differences (variances), and investigating their causes. It's a core budgetary-control and standard-costing tool that highlights where performance differed from plan so management can take corrective action.
Real-world example The monthly report shows a $5,000 adverse labor variance, prompting an investigation into overtime use.

Common follow-ups: What is a variance? | Why analyze variances?