ECONOMICS

Detailed explanation-1: -Definition: Variance analysis is the study of deviations of actual behaviour versus forecasted or planned behaviour in budgeting or management accounting. This is essentially concerned with how the difference of actual and planned behaviours indicates how business performance is being impacted.

Detailed explanation-2: -The three main types of variance analysis are material variance, labor variance and fixed overhead variance.

Detailed explanation-3: -Rate Variance measures calculate what portion of a Currency Variance is caused by differences in Cost Per Head. Volume Variance measures calculate how much of the Currency Variance is driven by fluctuation in Headcount.

Detailed explanation-4: -What variances are used to analyze the difference between actual direct material costs and standard direct material costs? Answer: The difference between actual costs and standard (or budgeted) costs is typically explained by two separate variances: the materials price variance and materials quantity variance.