Why It Matters: Cost Variance Analysis

Why learn about cost variance analysis?

Budgeting is step one of the process of effectively running a profitable business. After we get the budget ready, it is time to analyze the actual costs, time and efficiency! In this unit, we will be going back to the budget we created for Hupana Running Company and analyzing how different changes affect the profitability of the company.

Small changes, such as an increase in our raw materials, or needing to hire new employees can have a profound effect on our budgeted numbers, requiring you, as the manager, to evaluate and analyze to find ways to keep costs in line!

Sometimes, we have to make hard decisions. We will talk about some of those as we work through this module. We will also discuss ways we need to work as a team to find solutions to those problems.

Variance analysis helps us to see where we need improvement, where we are doing well, and allows companies to become or remain profitable.

Let’s jump in and see how our team at Hupana analyzes and corrects potential variances from their budget!