Variance analysis in standard costing and budgetary control examining sub-variances to understand the causes of differences between budgeted and actual figures in financial performance.
In standard costing, the variance consisting of the difference between the standard operating profit budgeted to be made on the items sold and the actual profits made. The analysis of the profit variance into its constituent sales, direct labor, direct material, and overhead variances provides the management of the organization with information regarding the source of the gains and losses compared to the predetermined standard.
