Variance analysis serves multiple purposes in a business environment:
1. Performance Measurement: It helps in measuring the efficiency of various departments and their adherence to budgets. 2. Cost Control: By identifying areas where actual costs exceed budgeted costs, businesses can take corrective actions to control unnecessary expenditures. 3. Forecasting and Planning: It provides valuable insights that can be used for future budgeting and planning. 4. Decision Making: It aids managers in making informed decisions by highlighting areas needing attention or improvement.