Variance Analysis
The process of comparing actual financial results with budgeted (planned) figures to identify variances, understand thei...
Formula
Variance = Actual Figure − Budgeted Figure (positive = favourable for revenue; negative = adverse for revenue)
Real World
In 2023, Marks & Spencer reported higher-than-budgeted food sales, creating a favourable revenue variance that prompted management to increase stock orders.
Exam Focus
Always state whether a variance is favourable or adverse AND explain the likely cause — both elements are needed for full marks.
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