Enter the planned value in currency.
Enter the actual value in currency.
History:

Explanation

What is Variance Analysis?

Variance analysis is a quantitative tool used to assess the difference between planned financial outcomes and the actual results. It is commonly used in budgeting and financial performance evaluation to understand discrepancies and make informed decisions.

How to Calculate Variance?

The variance can be calculated using the following formula:

Variance (V) is defined as:

§§ V = A - P §§

where:

  • § V § — variance
  • § A § — actual value
  • § P § — planned value

This formula indicates the absolute difference between the actual and planned values. A positive variance indicates that the actual value exceeded the planned value, while a negative variance indicates that the actual value fell short of the planned value.

Example:

Planned Value (§ P §): $100

Actual Value (§ A §): $120

Variance:

§§ V = 120 - 100 = 20 §§

This means the actual value exceeded the planned value by $20.

Percentage Variance Calculation

To understand the variance in relative terms, you can also calculate the percentage variance using the following formula:

Percentage Variance (PV) is defined as:

§§ PV = \frac{(A - P)}{P} \times 100 §§

where:

  • § PV § — percentage variance
  • § A § — actual value
  • § P § — planned value

This formula provides insight into how much the actual value deviated from the planned value in percentage terms.

Example:

Using the previous values:

Planned Value (§ P §): $100

Actual Value (§ A §): $120

Percentage Variance:

§§ PV = \frac{(120 - 100)}{100} \times 100 = 20% §§

This indicates that the actual value is 20% higher than the planned value.

When to Use the Variance Analysis Calculator?

  1. Budgeting: Evaluate how well your actual spending aligns with your budgeted amounts.

    • Example: Comparing monthly expenses against the budget.

  2. Financial Performance: Assess the performance of a project or department against its financial goals.

    • Example: Analyzing the profitability of a product line.

  3. Forecasting: Improve future forecasts by understanding past variances.

    • Example: Adjusting future sales forecasts based on historical performance.

  4. Cost Control: Identify areas where costs exceeded expectations and take corrective actions.

    • Example: Monitoring project costs to ensure they remain within budget.

  5. Strategic Planning: Make informed decisions based on performance metrics.

    • Example: Evaluating the success of a marketing campaign based on actual sales versus projected sales.

Practical Examples

  • Corporate Finance: A company may use this calculator to analyze the variance between its projected revenue and actual revenue for a specific quarter.
  • Project Management: Project managers can assess whether a project is on budget by comparing planned costs to actual expenditures.
  • Personal Finance: Individuals can track their spending habits by comparing their planned budget to actual expenses over a month.

Use the calculator above to input different planned and actual values and see the variance and percentage variance change dynamically. The results will help you make informed decisions based on the data you have.

Definitions of Key Terms

  • Planned Value (PV): The budgeted amount for a specific period or project.
  • Actual Value (AV): The real amount spent or earned during a specific period or project.
  • Variance (V): The difference between the actual value and the planned value.
  • Percentage Variance (PV): The variance expressed as a percentage of the planned value.

This calculator is designed to provide a clear and user-friendly experience, allowing you to analyze variances effectively and make data-driven decisions.