Accounting

We answer your accounting questions.

Over 500 questions have been answered on our accounting blog. Click here to suggest a question.



November 14, 2007

What is variance analysis?

Variance analysis is usually associated with explaining the difference (or variance) between actual costs and the standard costs allowed for the good output. For example, the difference in materials costs can be divided into a materials price variance and a materials usage variance. The difference between the actual direct labor costs and the standard direct labor costs can be divided into a rate variance and an efficiency variance. The difference in manufacturing overhead can be divided into spending, efficiency, and volume variances. Mix and yield variances can also be calculated.

Variance analysis helps management to understand the present costs and then to control future costs.

Variance analysis is also used to explain the difference between the actual sales dollars and the budgeted sales dollars. Examples include sales price variance, sales quantity (or volume) variance, and sales mix variance. A difference in the relative proportion of sales can account for some of the difference in a company’s profits.

Learn more about standard costs and variances at Standard Costing.

Related Questions



Comments

33 Responses to “What is variance analysis?”

  1. CONSTANCE MUMBA on April 24th, 2008 10:07 am

    i need full information about variance analysis

  2. benard on April 29th, 2008 3:09 am

    I appreciate your work but please give me full iformation on variance analysis

  3. Astha on May 16th, 2008 3:39 am

    Please provide me full information on variance analyis.

  4. Ibrahim on June 17th, 2008 3:00 am

    Please provide me full information on variance analysis. Wonderful job you are doing. Thanks

  5. ACoach on June 18th, 2008 10:05 am

    See the topic “Standard Costing” under the tab “Topics Explained” on http://www.AccountingCoach.com

  6. Brookes on July 14th, 2008 5:40 am

    Please provide me with full information on varience analysis.

  7. maryam on July 18th, 2008 9:17 am

    plz explian the topic mix and yield variances

  8. Dan on July 19th, 2008 6:44 am

    I would like a detailed explanation on variance analysis.

  9. freddya on August 23rd, 2008 3:53 am

    Please provide me full information on variance analyis.

  10. yed on September 9th, 2008 11:10 pm

    how about the aanalysis of variance on projected pay out of branches to actual pay out of cash? thanks

  11. forough on September 21st, 2008 5:16 am

    why we havw problem with Varianve analysis in modern manufacturing enviroments??

  12. nidhi on October 4th, 2008 6:20 am

    please provide me with the details of the importance of variance analysis to the management THANKS

  13. albus on October 9th, 2008 3:54 am

    who is the author???
    give me a name please…

  14. Digamber on October 10th, 2008 9:03 am

    why to calculate the revised standard hour and what is its inferance?

  15. Oghale John on October 11th, 2008 3:11 am

    Hi, i need a format for calculation. Thanks

  16. ACoach on October 14th, 2008 2:48 pm

    You can read about the author here:
    http://www.accountingcoach.com/aboutus.html

  17. vicky on November 19th, 2008 2:22 pm

    i would like all the information you have on varience analysis as i need to do a detailed description on this subject please

  18. mokete on January 6th, 2009 1:13 pm

    plaese provide me with detailed descriptoin on varience analysis

  19. mhiriam on February 7th, 2009 6:21 pm

    please give me an explaination about diluted earnings per share.thanks

  20. dia on February 20th, 2009 11:06 am

    please provide solved examles on fix and flex budget

  21. chamika on March 9th, 2009 10:11 pm

    Please provide me full information on variance analysis.

    greatful if Price, Qty variances etc seperately shown and explained

  22. kodina kamisa on March 10th, 2009 1:07 pm

    I NEED FULL INFORMATION ABOUT VARIANCE ANALYSIS AS I AM ABOUT TO WRITE EXAMS. MAY I ALSO HAVE QUESTIONS AND ANSWERS ON THIS TOPIC

  23. James aiworo on March 20th, 2009 3:34 am

    Hi acoach,i my school now,we are doing accounting entry for variance analysis,under the following concept.actual cost,allow cost and standard cost.i need a format calculation of it and how to post the entry.

  24. ACoach on March 20th, 2009 6:58 am

    You will find that information under the Explanation of Standard Costing on http://www.AccountingCoach.com.

  25. dahibara on March 28th, 2009 12:45 pm

    hi
    pls provide details abt variace.
    thanks,
    cuttack dahibara

  26. atul on April 4th, 2009 2:15 pm

    plz, provide detail abt relationship of varience analysis with material,labour and overhead.

  27. atul on April 4th, 2009 2:16 pm

    What is varience analysis?

  28. Roxy on May 22nd, 2009 9:06 am

    Do you agree or disagree with the statement -”Standard Costing and Variance Analysis are appropriate to any type and size of organisation”

  29. Hloms on June 8th, 2009 8:01 am

    Plse explain fixed overheads variance and variable overheads variance in detail

  30. ACoach on June 9th, 2009 7:00 am

    We explain the overhead variances on AccountingCoach.com under the topic Standard Costing. You can read the explanation and do the drills online at no cost.

  31. mary on June 19th, 2009 8:00 am

    can i have the answer to the question roxy placed on the 22nd May 2009. thanks

  32. joice on June 25th, 2009 9:11 pm

    maybe you should buy the book or anything… to have the concrete definition…..

  33. Saiqa on July 12th, 2009 2:04 pm

    can you please explain advantages and disadvantages of stanadardcoting and variances analysis

Leave a Reply