Variance Analysis

Variance analysis is an essential tool for effective management control. It is widely believed that costs can only be controlled through people. It is people in the from of responsible individuals, often managers, who have authority to control costs, who receive hourly, daily , weekly or monthly performance reports. These reports compare actual and budgeted performance and highlight the resulting variances. The individual are expected to respond reported. If the variances are adverse, the manager should first attempt to determine the cause of the variance and then ensure that it does not recur. If the variances are favorable, the manager should also attempt to determine the cause of the variance, which might be attributable to an easily achieved standard or a change in conditions

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