What is 'Budget Variance'
Budget variance is a periodic measure used by governments, corporations or individuals to quantify the difference between budgeted and actual figures for a particular accounting category. A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, meaning losses and shortfalls. Budget variances occur because forecasters are unable to predict the future with complete accuracy. As a result, some variance should be expected when budgets are created.
BREAKING DOWN 'Budget Variance'
Budget variances can result from two sources  the things that can be controlled and things that cannot. A poorly planned budget, for example, is a controllable factor. Likewise, things like labor costs can be controlled by taking measures such as prohibiting overtime. Uncontrollable factors are often external and arise from occurrences outside of the company such as a natural disaster.

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How is an unfavorable variance discovered?
Learn how unfavorable variance is discovered through defining budget numbers, such as standard rates for labor and materials, ... Read Answer >> 
What does an unfavorable variance indicate to management?
Learn what an unfavorable variance indicates to management, such as problems with meeting expense and revenue targets or ... Read Answer >> 
What is price variance in cost accounting?
Understand what price variance is in relation to cost accounting. Learn the most common way price variance arises and how ... Read Answer >> 
Is variance good or bad for stock investors?
Learn how high variance stocks are good for some investors and how diversified portfolios can reduce variance without compromising ... Read Answer >> 
What is the difference between standard deviation and variance?
Understand the difference between standard deviation and variance; learn how each is calculated and how these concepts are ... Read Answer >> 
How much variance should an investor have in an indexed fund?
Learn more about the significance of variance in index funds, its value as a measure of volatility and other common analytical ... Read Answer >>