ECONOMICS

Detailed explanation-1: -A variance report compares actual to expected results. The typical format is to first present the actual results, followed by the expected results (in the form of a budgeted or standard number), after which the variance amount and variance percentage are stated.

Detailed explanation-2: -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.

Detailed explanation-3: -Management is responsible for evaluation of variances. This task is an important part of effective control of an organization. When total actual costs differ from total standard costs, management must perform a more penetrating analysis to determine the root cause of the variances.

Detailed explanation-4: -Standard cost variances are usually not reported in reports to stockholders. Standard costs serve as a device for measuring efficiency. The variance from standard for factory overhead cost resulting from operating at a level above or below 100% of normal capacity is termed volume variance.