What Is Variance Analysis? Budget vs Actual Explained

Variance analysis, managerial accounting’s standard tool for explaining a profit miss, compares actual results with the budget. If you’ve searched “what is variance analysis” or “variance analysis accounting,” you’ll see how a flexible budget and a profit bridge split each budget variance into sales volume, price and cost effects, the core of variance analysis, cost accounting and FP&A work. I walk through a hypothetical meal-kit business that planned $100,000 of operating profit but earned $48,000, showing every number so you can rebuild it in your own variance analysis Excel model. In finance, variance analysis shows where to investigate, not what caused the miss, so check the evidence before the findings feed into financial modeling or scenario forecasting. Whether you’re learning financial analysis 101 or doing the variance analysis finance teams run every month, this video gives you a practical framework for budget vs actual variance analysis, FP&A reporting and month-end reviews.

*Wharton & Wall Street Prep Financial Planning & Analysis (FP&A) — Up to $500 Off with code RYANOC*
https://ryano.finance/wharton-fpa

Chapters
0:00 – Why Profit Missed the Plan
0:32 – The Original Budget
1:36 – Actual Results and Variances
2:40 – The Flexible Budget
3:17 – Sales Volume Variance
3:47 – Price and Cost Variances
5:00 – Reconciling and Investigating the Profit Miss
5:53 – Wharton Financial Planning and Analysis Certificate

🎓 Other Ivy League Certificate Programs by Wall Street Prep — Up to $500 Off with code RYANOC
1. Columbia & Wall Street Prep AI for Business & Finance: https://ryano.finance/columbia-ai
2. Wharton & Wall Street Prep Real Estate Investing & Analysis: https://ryano.finance/wharton-real-estate
3. Wharton & Wall Street Prep Private Equity (PE): https://ryano.finance/wharton-pe
4. Wharton & Wall Street Prep Value Investing: https://ryano.finance/wharton-avi
5. Wharton & Wall Street Prep Restructuring & Distressed Investing: https://ryano.finance/wharton-rdi

*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Ryan O’Connell Finance LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.