Variance Analysis


The concept describes the essential activity of variance analysis for budgetary control. It explains the key strengths of variance analysis, as well as some limitations and offers practical implementation guidance and measures for success.

Technique Overview

Variance Analysis

Variance Analysis Definition

Variance analysis is a management process that involves comparing actual period business achievements with the budgeted figures (Fields, 2011). It is necessary to assess the absolute differences, their significance and the variance type (Crosson and Needles, 2010). There are two types of variance: favourable (income exceeds budget and/or expenses are lower than budget) and adverse (Collier, 2003).

Variance Analysis Description *

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Business Evidence

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Variance Analysis Weaknesses *

Examples of Variance Analysis *

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Business Application

Variance Analysis Implementation *

Success Factors of Variance Analysis *

Measures of Variance Analysis *

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Professional Tools

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Further Reading

Variance Analysis Web Resources *

Variance Analysis Print Resources *

Variance Analysis References (4 of up to 20) *

  • BusinessWeek.com (2012) Executive Profile: Nigel Railton. Available at: [Accessed on 12 Jan 2012].
  • Collier, P.M. (2003) Accounting for managers: interpreting accounting information for decision-making. John Wiley and Sons.
  • Crosson, S.V., Needles, B.E. (2010) Managerial Accounting. Cengage Learning.
  • Dean, G. W. Joye, M. P., Blayney, P. J. (1991) Strategic Management Accounting Survey: Overhead Cost Allocation and Performance Evaluation Practices of Australian Manufacturers. Accounting and Finance, 8.

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