Variance analysis is a tool of
budgetary control by evaluation of performance bv means of variances between
budgeted amount, planned amount or standa: d amount and the actual amount
incurred/sold. Variance analysis can be carried out for both costs and revenues.
A variance is the difference
between a budgeted, planned or standard amo,int
and the actual amount
incurred/sold. Variances can be computed for be, , and revenues.
The concept of variance is
intrinsically connected with p"?m, -d and actual re
.ilts and effects of the difference between those two on the peribrlt ince of
the ity or company.
The typology (according to the
nature of the underlying amour.. ; „ determined b~' the needs of users of the variance information and may include e.g.:
i. Variable cost variances
a) Direct material
variances
b)
Direct labour variances
c) Variable production overhead variances
2. Fixed production overhead
variances
3. Sales variances