1. What Is Negative Variance Calculation?

Negative variance calculation measures the difference between actual financial results and budgeted amounts, where negative values indicate overspending or underperformance against the budget.

2. How Does The Calculator Work?

The calculator uses the variance formula:

Where:

• \( Actual \) — Actual financial result in currency
• \( Budget \) — Budgeted amount in currency

Explanation: A negative result indicates actual spending exceeded the budget (over budget), while a positive result indicates spending was under budget.

3. Importance Of Variance Analysis

Details: Variance analysis is crucial for financial management, budgeting, and performance evaluation. It helps identify areas of overspending, efficiency opportunities, and informs future budgeting decisions.

4. Using The Calculator

Tips: Enter actual and budget amounts in the same currency units. Negative results indicate overspending against the budget.

5. Frequently Asked Questions (FAQ)

Q1: What does negative variance mean?
A: Negative variance indicates actual spending exceeded the budgeted amount, representing overspending or cost overruns.

Q2: How is variance percentage calculated?
A: Variance percentage = (Variance / Budget) × 100%. This shows the variance as a percentage of the budget.

Q3: When is variance analysis typically performed?
A: Variance analysis is commonly performed monthly, quarterly, or annually as part of financial reporting and budget review processes.

Q4: What factors can cause negative variance?
A: Unexpected expenses, price increases, inefficient operations, inaccurate budgeting, or changes in business conditions can all contribute to negative variance.

Q5: How should negative variance be addressed?
A: Investigate root causes, implement cost controls, adjust operations, revise future budgets, or reallocate resources to address areas of overspending.