From the course: Excel: Management Accounting
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Variance analysis in managerial accounting - Microsoft Excel Tutorial
From the course: Excel: Management Accounting
Variance analysis in managerial accounting
- [Instructor] In this video, we'll look at the concept of variance analysis and introduce the three major types of variance analysis that you may see out there in practice. Variance analysis is really all about helping firms to understand where they have been and where they are going, and the relationship between those two. What we're doing here is digging into the variance, or the difference, between actual financial results and either the firm's planned results for the future, that is, what their budget looks like, or the past results that the firm has already achieved. The goal here is to help the firm to better understand what's working and what's not and where their risks and opportunities lie. So, what is an accounting variance? Well, there's three major types. The first are plan variances. Now, I'm using operating margin here, but frequently either sales or net income can be substituted. So, when we refer to the first variance, plan variance, we're looking at our planned OM…
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