1. What Is Budget Variance?

Budget variance is the difference between the budgeted amount and the actual amount spent or earned. It's a key performance indicator in financial management that helps organizations track their financial performance against planned objectives.

2. How Does The Calculator Work?

The calculator uses the simple variance formula:

Where:

• \( Budget \) — Planned or expected amount (currency)
• \( Actual \) — Realized or actual amount (currency)

Interpretation: A positive variance indicates spending under budget or revenue over budget (favorable), while a negative variance indicates spending over budget or revenue under budget (unfavorable).

3. Importance Of Variance Calculation

Details: Calculating budget variance is essential for financial control, performance measurement, and informed decision-making. It helps identify areas of over/under spending, supports budget adjustments, and improves future budgeting accuracy.

4. Using The Calculator

Tips: Enter both budget and actual amounts in the same currency. Values must be non-negative numbers. The calculator will compute the difference between budget and actual amounts.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive variance mean?
A: A positive variance typically indicates favorable performance - either spending less than budgeted or earning more than expected.

Q2: What does a negative variance mean?
A: A negative variance typically indicates unfavorable performance - either spending more than budgeted or earning less than expected.

Q3: Should I always aim for zero variance?
A: Not necessarily. Some variance is normal, but significant variances (positive or negative) should be investigated to understand the underlying causes.

Q4: How often should variance analysis be performed?
A: Variance analysis is typically performed monthly as part of regular financial reporting, but can be done more frequently for critical budget items.

Q5: Can this calculator handle different currencies?
A: The calculator performs mathematical calculations only. For multi-currency analysis, convert all amounts to a common currency before calculation.