Variance (statistics)
Statistical variance measures dispersion using the average squared deviations from a mean, with the divisor determined by the purpose. Population variance uses N when describing the whole population; an unbiased sample estimate commonly uses n−1. Its units are squared, so standard deviation is often easier to interpret. This statistical sense differs from a management-accounting variance between actual and standard results. State the population or sample convention before calculating.
Worked example
For the whole population 2, 4, 6, the mean is 4 and squared deviations are 4, 0, 4. Population variance = 8 / 3 = 2.6667. If these were a sample used for the usual unbiased estimate, variance would be 8 / 2 = 4.
Common mistake
Using n and n−1 interchangeably or confusing statistical variance with an adverse accounting cost variance.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |
