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Use of Variance Analysis in Business

Variance analysis is a tool used in budgeting and management accounting to evaluate performance by comparing budgeted, planned, or standard amounts to actual amounts incurred or sold. It can be used to analyze variances in both costs and revenues. Variance analysis assists businesses with managing budgets by controlling costs compared to actual costs, which can help adjust business goals or strategies. It also helps with forecasting future performance by identifying patterns in past business data, and understanding demand. Additionally, analyzing variances in metrics and the market helps businesses build products sensibly and identify key differences to achieve a competitive advantage.

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32 views

Use of Variance Analysis in Business

Variance analysis is a tool used in budgeting and management accounting to evaluate performance by comparing budgeted, planned, or standard amounts to actual amounts incurred or sold. It can be used to analyze variances in both costs and revenues. Variance analysis assists businesses with managing budgets by controlling costs compared to actual costs, which can help adjust business goals or strategies. It also helps with forecasting future performance by identifying patterns in past business data, and understanding demand. Additionally, analyzing variances in metrics and the market helps businesses build products sensibly and identify key differences to achieve a competitive advantage.

Uploaded by

jackadams
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Use of Variance Analysis in Business

Submitted to:
Mastak Al Amin
Introduction to
Statistics
Course code: STA 101
Section: 02
Use of Variance Analysis in Business
Group Members:

Please write your name/id
Please write your name/id
Please write your name/id
Abrar Hassan Saadi
13104186
What is Variance?
The difference between an expected and actual
result such as between a budget and actual
expenditure.

Statistics: The arithmetic mean of the squares of the
deviations of all values in a set of numbers from
their arithmetic mean.



The formula
Variance analysis
Variance analysis, in budgeting
(or management accounting in general), is a
tool of budgetary control
It assists in evaluating performance by means
of variances between budgeted amount,
planned amount or standard amount and the
actual amount incurred/sold.
Variance analysis can be carried out for both
costs and revenues
Use of variance analysis in Business
Budget vs. Actual Costs

Variance analysis is important to assist with
managing budgets by controlling budgeted versus
actual costs.

Variances between budgeted and actual costs
might lead to adjusting business goals, objectives
or strategies.
Use of variance analysis in Business
Budget vs. Actual Costs

0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2011 2012
budgeted cost
actual cost
Use of variance analysis in Business
Forecasting

It uses patterns of past business data to construct
a theory about future performance

Being able to mathematically forecast sales helps
understanding demand
Use of variance analysis in Business
Sensibility in competition


-Variance of different metrics in a market helps
building products more sensibly


-analysis of variance in market monitoring indicates
key differences which helps towards achieving
competitive advantage



Use of variance analysis in Business
Sensibility in competition







Thank you

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