Define: Analysis Of Variance

In standard costing and budgetary control this refers to the analysis of variances in order to determine their causes. The total profit variance or production cost variance is analysed into sub-variances to indicate the major reasons for differences between budgeted figures and actual outcomes.

The total profit variance or production cost variance is analysed into sub-variances to indicate the major reasons for differences between budgeted figures and actual outcomes.

The main sub-variances include:

• direct labour efficiency variance
• direct labour rate of pay variance
• direct labour total cost variance
• direct materials price variance
• direct materials total cost variance
• direct materials usage variance
• fixed overhead total variance
• overhead efficiency variance
• overhead expediture variance
• overhead total variance
• sales margin price variance
• sales margin volume variance
• variable overhead total variance

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Definitions for Analysis Of Variance are sourced/syndicated from:

• Oxford Dictionary Of Economics
• BusinessDictionary.com
• Oxford Dictionary Of Accounting
• Oxford Dictionary Of Business & Management

This glossary post was last updated: 18th March 2019.