... 2 £22,000 £20,000 Year 3 £15,000 £18,000 Year 4 £14,000 £19,000 Year 5 £12,000 £19,000 Variance Analysis Variance is the amount by which the actual result differs from the budgeted figure. It is usually measured each month, by comparing the actual outcome with the budgeted one. It is important to note that variances are referred to as adverse or favourable - not positive or negative. A favourable variance is one which leads to higher than expected profit (revenue up or costs down). An adverse variance is one which reduces profit, such as costs being higher than the budgeted level. The following table shows the variance analysis of Slingshots Master Budget: Variable Budget (million) Actual (million) Variance (million) Sales (less) 230 200 30 Adverse Direct Costs 110 112 2 Adverse Gross Profit (less) 120 88 32 Adverse Overheads 50 80 30 Adverse Net Profit 70 8 62 Adverse The following table shows the variance analysis of Slingshots Overheads Budget: Variable Budget (million) Actual (million) Variance (million) Administration 5 8 3 Adverse Personnel 10 9 1 Favourable Production 13 18 5 ...

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