Sue P. Gombio
Grand Canyon University
Variance Analysis is utilized to support the management during the initial stages. It is the procedure of investigating each variance between the actual and budgeted costs to determine the reasons as to why the planned amount was not met, in more detailed explanation (Ventureline, 2012). There are several influences that contribute to the variance report and one is the department’s assumptions, second is the possible risk for this assumption, and third is the actual expense used for the budget. Let’s say the CEO or Director announces the monthly budget that the department needs to meet. Once the department receives the monthly budget outcomes, the budget …show more content…
In cases like this, the manager could always ask for the Human Resource’s assistance to make sure that the new hire and the company or department both agrees on the approved budget or pay. In preparing the variance report for the CEO or Director regarding the hiring example, the manager would need to explain why the salary offered to the new hire is high and the budget for the supplies is low. As stated earlier, the budget for supplies is not always going to be met because of the supplies’ lifespan; therefore, personally I would prefer the supplies budget be lowered and the pay for employees increases. It makes it balanced.
Development of variance report is significantly important for each and every business to keep the budget under control. It also projects where the budget is being used, or is it being used wisely or not. This report influence the budget expense, the current budget used, the difference becomes the variance amount. There are risks involving the actual expense being used by the department like new hire employees, or the annual pay increase for employees, but depending on the situation, the department budget can either be met or can be under the budget specified. In