Conducting variance analysis involves several steps:
1. Set Budget and Standards: Begin by establishing budgeted figures and standard costs for revenues and expenses. 2. Collect Actual Data: Gather actual performance data over the period under review. 3. Calculate Variances: Subtract the budgeted figures from the actual figures to calculate the variances. 4. Analyze Results: Assess whether the variances are favorable or unfavorable and try to determine the underlying causes. 5. Report Findings: Communicate the results to relevant stakeholders and suggest corrective actions if needed.