Variance analysis.

Corporate Finance Institute. (2017, October 7). Variance analysis. https://corporatefinanceinstitute.com/resources/accounting/variance-analysis/

This article provides a detailed technical analysis of variance analysis, defined as the quantitative investigation of the difference between actual and planned behavior. The Corporate Finance Institute explains how this tool is used by financial analysts and managers to maintain control over a business by monitoring deviations from budgets. The text breaks down various types of variances, including labor, material, and variable overhead variances, and provides the mathematical formulas required for their calculation. Furthermore, it discusses the qualitative aspects of variance analysis, such as determining whether a variance is "favorable" or "unfavorable" and identifying the root causes of these trends. The guide also touches on the importance of materiality, suggesting that managers should focus on significant variances that impact the bottom line. This is an essential resource for finance professionals seeking to master the analytical techniques required for rigorous financial planning and analysis.