1. What Is Budget Vs Actual Variance?

Budget vs Actual Variance is a financial metric that compares planned budget amounts to actual spending or revenue. It helps organizations measure financial performance and identify areas where results differ from expectations.

2. How Does The Calculator Work?

The calculator uses the percentage variance formula:

Where:

• \( \text{Budget} \) — Planned or budgeted amount (currency)
• \( \text{Actual} \) — Actual amount spent or earned (currency)

Explanation: A positive variance indicates spending under budget or revenue over budget. A negative variance indicates spending over budget or revenue under budget.

3. Importance Of Variance Analysis

Details: Variance analysis is crucial for financial management, helping organizations identify performance gaps, control costs, improve forecasting accuracy, and make informed budgeting decisions.

4. Using The Calculator

Tips: Enter both budget and actual amounts in the same currency. Budget must be greater than zero for accurate calculation. Results show as percentage with positive/negative values indicating favorable/unfavorable variances.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive variance mean?
A: A positive variance typically indicates favorable performance - either spending less than budgeted or earning more than budgeted.

Q2: What does a negative variance mean?
A: A negative variance typically indicates unfavorable performance - either spending more than budgeted or earning less than budgeted.

Q3: What is an acceptable variance percentage?
A: Acceptable variance thresholds vary by organization and budget category, but typically ±5-10% is considered reasonable for most operational budgets.

Q4: Can this calculator handle different currencies?
A: The calculator works with any currency as long as both budget and actual amounts are entered in the same currency unit.

Q5: How often should variance analysis be performed?
A: Monthly variance analysis is common practice, though some organizations may perform it quarterly or in alignment with their financial reporting cycles.