Business & ManagementIB

Variance analysis

Variance analysis...In cost accounting, a standard is a benchmark or a “norm” used in measuring performance. In many organizations, standards are set for both the cost and quantity of materials, labor, and overhead needed to produce goods...
Variance analysis

Variance exists when there is a difference between the budgeted figures and the actual outcome.

    Variance = Actual outcome − Budgeted outcome

Favourable variance exists when discrepancies are financially beneficial to the organisation (i.e., when the actual figures are higher than the).

Adverse variance exist when the discrepancies are financially detrimental to the organisation. They occur when actual costs are higher than expected, or when actual revenue is lower than budgeted (i.e., underselling).


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