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Management accounting or Managerial Accounting is concerned with the provisions and use of accounting information for managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.

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What is Variance Analysis?

Variance Analysis constitutes the examination of all those influences which may have caused the variances to occur and the identification of the management action necessary to rectify matters. The identification of variance is of no use in itself-the value lies in ascertaining the cause of the variance and acting to correct it. Variances may be either favorable (F) or adverse (A), depending upon the circumstances.

It is logical to view the variance as favorable when actual; costs are less than standard. But it does not follow automatically that these terms should be equated with good or bad. The such appraisal should be made only after the cause of the variance is known.

Variance analysis is of two types:

i) Cost variance-Variable cost variance & Fixed Cost Variance

ii) Revenue variance-On sales & on Margin

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