variance analysis techniques

Variance analysis methods compare actual performance to planned or budgeted figures to identify differences, called variances. Techniques include calculating the variance amounts (e.g., how much costs or revenues differ from expectations) and analyzing their causes, often by reviewing specific components like materials, labor, or overheads. This helps managers understand where deviations occur—whether favorable or unfavorable—and enables them to take corrective actions. Variance analysis provides insights into financial efficiency and operational performance, guiding better decision-making and future planning.