To identify the reasons for deviations from the budget
To set future budgets
To calculate the break-even point
The primary focus of variance analysis is to identify the reasons for deviations from the budget, helping management make informed decisions.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the primary focus of variance analysis?
Solution: The primary focus of variance analysis is to identify the reasons for deviations from the budget, helping management make informed decisions.
Steps: 5
Step 1: Understand what variance analysis is. It is a method used to compare actual financial performance to budgeted performance.
Step 2: Identify the main goal of variance analysis, which is to find out why there are differences (or variances) between what was planned (budget) and what actually happened.
Step 3: Recognize that these differences can be positive (better than expected) or negative (worse than expected).
Step 4: Learn that by analyzing these variances, management can understand the reasons behind them, such as changes in costs, sales, or other factors.
Step 5: Conclude that the insights gained from variance analysis help management make better decisions for the future.
