1. What is Budget Variance?

Budget variance is the difference between actual financial performance and budgeted amounts. It helps organizations measure financial performance and identify areas that need attention.

2. How Does the Calculator Work?

The calculator uses the budget variance formula:

Where:

• \( \text{Actual} \) — Actual amount spent or earned ($)
• \( \text{Budgeted} \) — Budgeted or planned amount ($)

Explanation: A positive variance indicates actual exceeded budget (favorable for revenue, unfavorable for expenses). A negative variance indicates actual was less than budget (unfavorable for revenue, favorable for expenses).

3. Importance of Budget Variance Calculation

Details: Budget variance analysis is crucial for financial management, helping organizations track performance, identify trends, and make informed decisions about resource allocation and future planning.

4. Using the Calculator

Tips: Enter actual and budgeted amounts in dollars. Both values must be valid non-negative numbers. The calculator will compute the difference between actual and budgeted amounts.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive variance mean?
A: For revenue: favorable (more income than expected). For expenses: unfavorable (more spending than budgeted).

Q2: What does a negative variance mean?
A: For revenue: unfavorable (less income than expected). For expenses: favorable (less spending than budgeted).

Q3: How often should variance analysis be performed?
A: Typically monthly or quarterly, depending on the organization's reporting cycle and the volatility of the business environment.

Q4: What are common causes of budget variances?
A: Market changes, unexpected expenses, operational inefficiencies, inaccurate forecasting, or strategic decisions that differ from the original plan.

Q5: How should organizations respond to significant variances?
A: Investigate root causes, adjust operations if needed, revise future budgets based on new information, and implement corrective actions when necessary.