Variance commentaries can be on different aspects of a business such as:
● Costs
● Revenue
● Profit and Loss
● Expenses
● Efficiency
In each of the above, the actuals are compared with the standard or targeted prices and thereafter reasons for variances are also analyzed. This helps the company to identify bottlenecks and areas of focus that it needs to work upon to achieve targeted results. Companies also prepare a trend analysis which can furthermore help them to make better forecasts for the upcoming period.
Some examples are:
Sales volume variance: explains the difference between actual and budgeted sales volume.
Sales price variance: explains the difference between actual and budgeted sales price.
Sales mix variance: explains the difference between actual and budgeted sales mix.
Material price variance: explains the difference between actual and budgeted material prices.
Material usage variance: explains the difference between actual and budgeted material usage.
Labor rate variance: explains the difference between actual and budgeted labor rates.
Labor efficiency variance: explains the difference between actual and budgeted labor efficiency.
Overhead spending variance: explains the difference between actual and budgeted overhead spending.
Overhead efficiency variance: explains the difference between actual and budgeted overhead efficiency.
Foreign exchange variance: explains the difference between actual and budgeted foreign exchange rates.
Other variances: depending on the business and industry, other variances such as currency, interest rate, etc.
