Variance Analysis

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HCA 240 April, 29 2012 Moiz Lalani Variance Analysis Variance Analysis is used to promote management action in the earliest stages. It is the process of examining in detail each variance between actual and budgeted costs to conclude the reasons as to why the budgeted amount was not met (Ventureline, 2012). There are several factors that go into a variance report. One is the assumption of the department. The second is the risk of the assumption. And thirdly the actual expense used to portray the budget. The vice president announces the budget that needs to be met monthly. Upon receiving the monthly budget results, the materials budget was not used properly, and the salary was higher than the planned budget. I will be explaining the…show more content…
Another factor that needs to be considered in the variance report would be the salary that is paid towards the employees. Given that the employees get paid a certain amount each pay period, it makes it easy for the manager to assume how much of the given budget needs to be used to pay them. But there are some risks that come along with the assumptions such as: annual reviews, and hiring more employees to help the department. The manager will either exceed the budget amount for the month or go under the budget depending on the situation. When preparing a variance report to the vice president, the manager would have to incorporate the reasons as to why the budget is either under or over the budget for the month. If the manager has several employees that reach their annual reviews for that month, they also review an annual incentive as well. Depending on the company the increase could be between 2% all the way up to 10% raise for the current employees. The manager would have to include the reasons as to why the variance amount was high on that month. And if the manager needs a new hire for the department, they would have to get approval from the vice president in order to see if it is in the budget, once they have approved, the manager is able to hire a new employee, and make sure that the new hire gets paid according to what the budget allows them to pay
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