Variance Analysis

Variance Analysis

Variance analysis is a process that is used to examine the variances between what was the actual and what was expected or budgeted to identify reasons of the deviation and why the results were not met. This way companies can gauge the performance of the company and analyze how close they have been to meet their budgetary goals. A good report will address trends, overspending and under spending. With that being done, financial risk to the company if the same trend continues can be evaluated and steps can be taken to reduce the risks.

In the context of a hospital, there are many factors that a manager has to consider to submit a report on the variance reported in the monthly budget results. For a higher salary and lower supply than what was budgeted many factors can be considered. This may include staff receiving more overtime than necessary, hiring staff members more than required etc. Once the problem is identified, a series of actions can be taken to achieve better results (Eastaugh, 2004).

The numbers in the report show a variance and thus the aim of the report mainly is to explain why there is a variance between the actual and budget and also suggest whether it is the first time such an event has taken place or is it an ongoing problem. Hence it is needed to analyze what constituted for this negative variance for the budget by salaries and how these higher salaries are affecting the budget financially. On the other hand that same is needed to be done for the positive variance shown in the monthly budget results regarding the supplies. The most essential thing is to keep looking for causes or reasons till the root cause of the variance is found.

Factors that lead to variance ...