variance analysis

Definition

The practice of comparing actual financial results to budgeted or forecasted amounts and investigating the differences. It's how management discovers that 'unforeseen circumstances' is code for 'we completely missed our projections.'

Example Usage

The variance analysis revealed that actual marketing spend exceeded budget by 300%, primarily due to the CEO's Super Bowl ad impulse purchase.

Origin

Developed in manufacturing cost accounting in the early 20th century, expanded to all areas of management accounting.

Fun Fact

Variances are classified as 'favorable' or 'unfavorable,' though spending less because you fired everyone is technically favorable in accounting terms.

Source: Management accounting terminology

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