Variance (accounting)
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: 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.: Example. Let us assume that standard direct material cost of production is as follows: Let us assume further that during the given period, 200 units of fuselage were manufactured, using X kg of Kevlar which cost Y Direct material total variance can be calculated as