1. What Is Expenditure Variance?

Expenditure variance is the difference between planned and actual spending. It helps organizations measure financial performance and identify areas where spending deviates from budget expectations.

2. How Does The Calculator Work?

The calculator uses the expenditure variance formula:

Where:

• \( Planned\ Expenditure \) — Budgeted or expected spending amount
• \( Actual\ Expenditure \) — Real spending amount

Explanation: A positive variance indicates spending was under budget, while a negative variance indicates overspending.

3. Importance Of Variance Calculation

Details: Calculating expenditure variance is essential for budget management, financial planning, cost control, and identifying operational inefficiencies.

4. Using The Calculator

Tips: Enter planned and actual expenditure amounts in currency units. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive variance mean?
A: A positive variance means actual spending was less than planned, indicating cost savings or underutilization of budget.

Q2: What does a negative variance indicate?
A: A negative variance indicates overspending, where actual costs exceeded the budgeted amount.

Q3: How often should variance analysis be performed?
A: Regular variance analysis (monthly or quarterly) helps maintain financial control and allows for timely budget adjustments.

Q4: What factors can cause expenditure variance?
A: Price fluctuations, unexpected expenses, operational changes, and inaccurate budget forecasts can all contribute to variance.

Q5: How should organizations respond to significant variances?
A: Significant variances should trigger investigation into root causes and may require budget revisions or operational changes.