Variance Analysis

Cards (14)

  • What is variance analysis primarily concerned with?
    Comparing actual results to budgeted results
  • What are the two variations in reality during variance analysis?
    Adverse and favorable
  • What does 'A' stand for in variance analysis?
    Adverse
  • What does 'F' stand for in variance analysis?
    Favorable
  • What are the three types of budgets mentioned?
    Profit budget, revenue budget, cost budget
  • What indicates an adverse situation in profit budgets?
    Reality is lower than expected profits
  • What indicates a favorable situation in profit budgets?
    Reality is higher than expected profits
  • What indicates an adverse situation in revenue budgets?
    Revenues are lower than expected
  • What indicates a favorable situation in revenue budgets?
    Revenues are higher than expected
  • How do cost budgets differ in terms of favorable and adverse situations?
    Lower costs are favorable, higher costs are adverse
  • How do you calculate profit from revenue and costs?
    Profit = Revenue - Costs
  • What is the variance situation for profit?
    Adverse, as actual is lower than budgeted
  • What are the key concepts in variance analysis?
    • Adverse: worse than budgeted
    • Favorable: better than budgeted
    • Types of budgets: profit, revenue, cost
  • How to interpret variance analysis results?
    • Identify if adverse or favorable
    • Analyze the impact on overall performance
    • Adjust future budgets accordingly