Definition: A Budget Variance Report compares actual performance to budgeted figures for a specific period, highlighting variances.
Importance: It provides insights into spending and revenue trends, helping management make necessary adjustments.
Usage: Companies use this report to analyze financial performance and refine budgeting processes for future periods.
Example:
After three months, "Sweet Treats" reviews its Budget Variance Report:
- Budgeted Operating Expenses: $12,000
- Actual Operating Expenses: $15,000
- Variance: $3,000 unfavorable.
The owner sees that unexpected ingredient costs caused the overspend and discusses cost-control measures to maintain profitability in future months.