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Variance Analysis

Variance analysis is a method used to assess the difference between expected outcomes and actual results. In business, it helps identify where performance deviates from budgets or forecasts. For example, if a company planned to spend $10,000 on marketing but actually spent $12,000, the variance is $2,000. This analysis allows organizations to understand why these differences occur, whether due to unexpected costs, changes in sales, or other factors. By analyzing variances, businesses can make informed decisions to improve future performance and better manage resources.

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    Variance analysis is a financial tool used to assess the difference between planned outcomes and actual results. It helps identify why certain performance measures, like profits or expenses, deviated from predictions. By analyzing these variances, businesses can understand the reasons behind their financial performance—such as unexpected costs or changes in sales. This process allows organizations to make informed decisions, adjust budgets, and develop strategies to improve future performance, ensuring they stay on track with their financial goals.