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Variance Analysis of Expenses-PLS Help!!!!

10 July 2010

Dear all,

I am in a trouble........I am instructed by my BOSS to go on client and do Variance Analysis of all the Operating Expenses of the client ............But I Dont Know wat VARIANCE ANALYSIS is ??? he wants me to QUANTIFY it also............

Now he is not picking up his phone............and i dont know wat i m supposed to do in variance analysis...............Kindly help me guys..........pls lemme know wat this is all about???

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3 Replies

CA Amit Kanani (Practicing CA) (338 Points)
Replied 10 July 2010

Variance is difference between budget and actual.

if i cud fly (#) (381 Points)
Replied 10 July 2010

@ amit if that wat variance analysis means den i hv to compare expected budget of expenses with actual expense incurred??

But y i m supposed to do dat as stat audior?? dont u think dats the work of Internal auditor??

CA. Uttam Agarwal (Assistant Manager: BPnA) (41 Points)
Replied 10 July 2010

Hi, I am into variance analysis profile...I hope I can help u..

See, in variance analysis, you should first gain an understanding of budget/plan that the company had fixed ahead of the year starting..you should see what are the major heads of expenses and then try to drill down into details..u should know the assumptions taken in the plan for arraiving at the Planned numbers e.g business volumes projected, related increase in cost due to change in volume, expansion and inflation.

now for actuals, you should find out the expenses where there is variances and then try to know what are the factors leading to variances, it could be due to: change in business voulmes, changes in economic, regulatory environment, change of management decisions, and so on.. for example, marketing cost may be low bcoz management deferred the adverstisement exp to next year...hence the variance...staff cost may be higher due to higher salary offered driven by higher demand....

Hope this helps you dear.... ALL THE BEST !!!\

Regds, Uttam