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.
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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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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