Variance Analysis
The process of comparing actual financial results with budgeted (planned) figures to identify variances, understand thei...
Formula
Variance = Actual − Budgeted (Favourable if better than budget; Adverse if worse)
Real World
In 2023, Thames Water reported an adverse variance on its capital expenditure budget, spending £200m more than planned on infrastructure repairs, alarming investors.
Exam Focus
Always label a variance as favourable or adverse and explain why — stating the number alone will not earn application or analysis marks.
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