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Variance

A variance is the difference between actual results and an appropriate budget or standard comparator. It can be expressed as favourable or adverse to the specified profit or cost measure. Decomposing the total can distinguish price, quantity, rate, efficiency, activity or planning effects. State the basis and sign convention, and match the comparator to actual output where required. A variance identifies a difference, not a proven cause or a judgment of managerial competence.

Worked example

Flexed material cost is $10,000 and actual cost $10,600, giving a $600 adverse cost variance on that comparison.

Common mistake

Favourable does not always mean desirable: cheaper material may cause more waste or customer defects.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA APM Direct September 2026–June 2027
ACCA MA Direct September 2026–June 2027
ACCA PM Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027