Business & Finance Assignment Help | Business & Finance homework help
To calculate the variance, you must take into consideration the actual expenditures versus the expected budget for this particular line item. To do so, we must first subtract the original budgeted amount from current expenditures incurred – referred to as ‘Actual Expense’ -which will give us net figure after accounting for any variances i.e., if higher than planned then unfavorable or lower then favorable.
It appears in this example that Actual Expense is higher than budgeted – $100,000 vs. $95,000. This indicates a $5,000 negative difference, which implies that the money spent was more than originally planned. These data will help you determine where there is room for cost-savings or a need to streamline operations in order to improve profitability.
Overall therefore it is clear that examining differences between planned & actual financial figures provides invaluable insight into how best manage resources efficiently meaning businesses need regularly assess their performance against forecasted targets regularly in order remain competitive within given industry sector.