Variance ( accounting ) - wikipedia Variance ( accounting ) This article does not cite any sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. ( December 2009 ) For other uses, see Analysis of variance. In budgeting ( or management accounting in general ), a variance is the difference between a budgeted, planned, or standard cost and the actual amount incurred / sold. Variances can be computed for both costs and revenues. The concept of variance is intrinsically connected with planned and actual results and effects of the difference between those two on the performance of the entity or company. Types of variances Variances can be divided according to their effect or nature of the underlying amounts. When effect of variance is concerned, there are two types of variances : When actual results are better than expected results given variance is described as favorable variance. In common use favorable variance is denoted by the letter F - usually in parentheses ( F ). When actual results are worse than expected results given variance is described as adverse variance, or unfavourable variance. In common use adverse variance is denoted by the letter U or the letter A - usually in parentheses ( A ). The second typology ( according to the nature of the underlying amount ) is determined by the needs of users of the variance information and may include e.g. : Variable cost variances Direct material variances Direct labour variances Variable production overhead variances Fixed production overhead variances Sales variances Variance analysis Main article : Analysis of variance Variance analysis, first used in ancient Egypt, in budgeting or ( management accounting ) in general, is a tool of budgetary control by evaluation of 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. 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 calculation should always be calculated by taking the planned or budgeted amount and subtracting the actual / forecasted value. Thus a positive number is favorable and a negative number is unfavorable. See also Budgeting Non-profit organization Standard budget Flexible budget Rolling budget Activity - based budgeting ( ABB ) Controllable items Non-controllable items Standards Motivation Performance evaluation Direct material total variance Direct material price variance Direct material usage variance Retrieved from `` https://en.wikipedia.org/w/index.php?title=Variance_(accounting)&oldid=823656035 '' Categories : Management accounting Corporate finance Hidden categories : Articles lacking sources from December 2009 All articles lacking sources Talk About Wikipedia Add links This page was last edited on 2 February 2018, at 16 : 02. About Wikipedia

Question: a(n) is a difference between actual and budgeted performance
Answer: variance