What is a Variance and Variance Analysis?
A variance is the difference between ACTUAL and the STANDARD. (a) Where the actual exceeds the standard the difference is an ADVERSE variance; (b) Where the standard exceeds the actual, the difference is a FAVORABLE variance; (c) The computation, classification and investigation of the variances are called VARIANCE ANALYSIS. (d) Management uses variance analysis to identify the causes so that corrective action can be taken and to pinpoint responsibility.
