What was originally reported as $38,900 favorable compared to budget, has been determined via the analysis to be $85,400 unfavorable ($23,650 of favorable labor rate variance and $109,050 of unfavorable efficiency variance). Assuming that the performance report is for the final month of the fiscal year, what is your reaction to it?

You have just completed preparing a book.

At first, the variance reported of $38,900 in favor of the budget appears quite positive. It indicates that the organization will meet its financial targets for the year. On closer inspection, this number is inaccurate. It actually represents a deficit of nearly $85,400 (23,650 favorable variances in labor rates and $109,050 unfavorable variances in efficiency). The discrepancy shows how it’s important to thoroughly investigate all variances in order to get an accurate view of performance.

The fact that the report is based on the final results of fiscal year, makes the situation more worrying as potential solutions can only have a limited impact. For a quick solution to this issue, I’d recommend looking at ways that operational efficiency could be improved through adjusting staffing or by introducing technology and new processes.

In this regard, I think it’s important that organizations keep track of their key performance indicators and pay attention to discrepancies in actual results. This allows companies to stay on top of potential problems and identify areas that need improvement.