Variance analysis is a strong tool to locate differences between past and present performances and respond to the issue appropriately.

1. Use of Variance Analysis in Business
Introduction to
Statistics
Course code: STA 101
Section: 02
Submitted to:
Mastak Al Amin

2. Use of Variance Analysis in Business
Group Members:
• Please write your name/id
• Please write your name/id
• Please write your name/id
• Abrar Hassan Saadi
13104186

3. What is Variance?
• The difference between an expected and actual
result such as between a budget and actual
expenditure.
• Statistics: The arithmetic mean of the squares of the
deviations of all values in a set of numbers from
their arithmetic mean.

4. The formula

5. Variance analysis
• Variance analysis, in budgeting
(or management accounting in general), is a
tool of budgetary control
• It assists in evaluating performance by means
of variances between budgeted amount,
planned amount or standard amount and the
actual amount incurred/sold.
• Variance analysis can be carried out for both
costs and revenues

6. Use of variance analysis in Business
• Budget vs. Actual Costs
– Variance analysis is important to assist with
managing budgets by controlling budgeted versus
actual costs.
– Variances between budgeted and actual costs
might lead to adjusting business goals, objectives
or strategies.

7. Use of variance analysis in Business
• Budget vs. Actual Costs
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2011 2012
budgeted cost
actual cost

8. Use of variance analysis in Business
• Forecasting
– It uses patterns of past business data to construct
a theory about future performance
– Being able to mathematically forecast sales helps
understanding demand

9. Use of variance analysis in Business
• Sensibility in competition
-Variance of different metrics in a market helps
building products more sensibly
-analysis of variance in market monitoring indicates
key differences which helps towards achieving
competitive advantage

10. Use of variance analysis in Business
• Sensibility in competition

11. Thank you