Variances
In this lesson, you'll learn what variances are, how to identify them, and why they matter for management control. A variance is the difference between what you budgeted and what actually happened—and classifying them as favourable (better than expected) or adverse (worse than expected) is crucial for understanding
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In this lesson
- 0:00 Variance Analysis and Management Control
- 0:18 Adverse and Favourable Variances Explained
- 2:05 Classifying Variances in Practice
- 4:28 Why Flexed Budgets Matter
- 5:22 Interpreting Meaningful Variance Results
About this lesson
performance. You'll discover why comparing actual results directly to the original budget can be misleading, and how creating a flexed budget—adjusted for actual activity levels—gives you the clear picture management needs to focus improvement efforts in the right places. This session covers a fundamental tool in Performance Management and Management Accounting. By working through a practical example, you'll see how to calculate variances correctly, avoid common classification mistakes, and use variance analysis to pinpoint exactly where performance has deviated from plan. Whether you're preparing for your PM or MA exams, mastering this concept will help you move beyond simply spotting differences to understanding what they actually mean for business performance and where to direct management attention.
Duration: 6m
Transcript
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