How to Read Budget Variance Analysis

Basics of variance analysis: how to read favorable vs. unfavorable variance and execution rates.

【Key terms】

· Budget amount: planned figure

· Actual amount: amount actually incurred

· Variance = Actual − Budget

【Favorable variance (F)】

Revenue items: Actual > Budget (sales exceeded plan)

Cost items: Actual < Budget (costs came in under budget)

【Unfavorable variance (U)】

Revenue items: Actual < Budget (sales missed plan)

Cost items: Actual > Budget (costs over budget)

【Execution rate (執行率)】

= (Actual ÷ Budget) × 100. Over 100% = over budget; under 100% = within budget.

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