Essay on Variance Analysis

926 Words Oct 19th, 2012 4 Pages
HCA 240
April, 29 2012
Moiz Lalani
Variance Analysis Variance Analysis is used to promote management action in the earliest stages. It is the process of examining in detail each variance between actual and budgeted costs to conclude the reasons as to why the budgeted amount was not met (Ventureline, 2012). There are several factors that go into a variance report. One is the assumption of the department. The second is the risk of the assumption. And thirdly the actual expense used to portray the budget. The vice president announces the budget that needs to be met monthly. Upon receiving the monthly budget results, the materials budget was not used properly, and the salary was higher than the planned budget. I will be explaining the
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To prepare the variance report for the vice president regarding to the example given, the manager would have to explain why the salary was high, and the budget for the supplies are under budget. In the variance report, the manager would have to compare and contrast the numbers from previous months and verify the reasons why the salary is high. As I stated before the supplies budget is not always going to be met due to the life span of the supplies used in the department. I would suggest that maybe the supply budget needs to be lowered and the salary budget increased in order to balance out the difference. The variance report is important for any business in order to keep the budget under control. It also shows the areas where the budget is used. The variance report factors into the budget expense, actual budget used, and the variance amount is the difference. There are many risks that involve the actual expenses used in the department. Such as: new employees, or annual reviews for current employees. Depending on the situation, the budget can either be met, or it be under the budget amount given. While preparing the variance report, the manager would have to compare and contrast previous months in order to determine the difference of where the actual expense was used if it was higher than the budget given. All these factors need to be in place in order to

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