What factors causes Budget Variance?

Re: What factors causes Budget Variance?

There are 7 variances associated with a budget ( which are generally calculated for controlling purposes)

1- Material Price variance

2- Material Quantity variance

3- Labor rate variance

4- Labor efficiency variance

5- Spending variance

6- Efficiency variance

7- Capacity variance

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Re: What factors causes Budget Variance?

A budget, defined basically, is a strategic financial plan. It usually considers income and expenditures. In doing so, a number of other factors, such as labor and raw material availability, may need to be considered. A budget variance arises when there is a difference between the plan and the outcome.

When considering budget variance, it can be very important to differentiate between the things that affect the budget that can be controlled and those that cannot. There are a number of reasons why a budget variance can occur. One reason is that the budget was poorly planned. This is an example of a controllable factor.

Some causes of budget variance can be controlled. Labor costs are another example. A company can control its spending in this area by making decisions such as prohibiting overtime and outsourcing projects that would otherwise require high salaried staff members.
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Re: What factors causes Budget Variance?

The cost of materials is the other major factor in the budget variance. The company budgets for a certain price of raw materials that it expects to use to make each product. For example, it may use $20 of raw materials to produce a product that it sells for some dollars.

Re: What factors causes Budget Variance?

thanks for the list guys. it'll really help me.