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Variance analysis – meaning

Variance analysis is the process of computing the amount of and isolating the cause of variance between actual cost or revenue and standard cost and revenue.

Variance analysis involves the computation of individual variance and determination of causes of each variance

The purpose of variance analysis is to enable management to improve operations, increase efficiency, utilize resources more effectively and reduce cost. To serve these purpose variance analysis must be easy to understand, they must be calculated immediately and the cause must be immediately inquired and remedial measures should be taken.

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