Performing variance analysis involves several steps:
1. Identify the Variances: Determine the areas where actual performance deviates from the budgeted figures. 2. Calculate the Variances: Use formulae to quantify the difference between actual and budgeted amounts. 3. Analyze the Causes: Investigate the underlying reasons for the variances. This could involve looking into external factors like market conditions or internal factors like inefficiencies. 4. Report the Findings: Document the variances and their causes. This report should be communicated to the relevant stakeholders. 5. Implement Corrective Actions: Based on the analysis, take necessary corrective actions to address unfavorable variances.