Variance Analysis for Budgeting

• Variance Analysis:

  • Positive/favourable (better than expected)
  • Adverse/unfavourable (worse than expected)
• A favourable variance might mean that:

  • Costs were lower than expected in the budget
  • Revenue/profits were higher than expected
• An adverse variance might arise because:

  • Costs were higher than expected
  • Revenue/profits were lower than expected