Variance Analysis

Variance Analysis in management accounting is a tool of budgetary control, by evaluation of performance by means of variances between the budgeted or planned amount and the actual amount.

Variance analysis can be carried out for both costs and revenue. Analysis can be carried out at an overall level but often examined in greater detail. In the case of sales revenue, the overall sales revenue variance is made up of a price variance and a volume variance. The volume variance can be further analysed in to a sales mix and a sales quantity variance. These tools can be set up within a management accounting system to provide explanations and information about how the actual results compare with the plan.

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