Variance Analysis is the process of comparing actual financial or operational performance with predetermined standards to identify deviations known as variances.
- These variances are analyzed to determine their causes, assess their impact on business performance, and take corrective actions to improve efficiency and control costs.
- The difference between standard costs and actual costs is known as variances.
Favourable and Unfavourable Variances:
- If actual cost is less than the standard cost, the variance will be favourable.
- If actual cost is more than the standard cost, the variance will be unfavourable.
Types of Costs Variances:
- Material Variances
- Labour/wages Variances
- Overhead Variances
