How do you explain variance analysis?

How do you explain variance analysis?

How do you explain variance analysis?

Definition: Variance analysis is the study of deviations of actual behaviour versus forecasted or planned behaviour in budgeting or management accounting. This is essentially concerned with how the difference of actual and planned behaviours indicates how business performance is being impacted.

What is acceptable variance limit?

What are acceptable variances? The only answer that can be given to this question is, “It all depends.” If you are doing a well-defined construction job, the variances can be in the range of ± 3–5 percent. If the job is research and development, acceptable variances increase generally to around ± 10–15 percent.

Is a higher or lower variance better?

Low variance is associated with lower risk and a lower return. High-variance stocks tend to be good for aggressive investors who are less risk-averse, while low-variance stocks tend to be good for conservative investors who have less risk tolerance. Variance is a measurement of the degree of risk in an investment.

What is considered a good variance?

As a rule of thumb, a CV >= 1 indicates a relatively high variation, while a CV considered low. This means that distributions with a coefficient of variation higher than 1 are considered to be high variance whereas those with a CV lower than 1 are considered to be low-variance.