What is 'Efficiency Variance'
Efficiency variance is the difference between the theoretical amount of inputs required to produce a unit of output and the actual number of inputs used to produce the unit of output. The expected inputs to produce the unit of output are based on models or past experience. The difference between expected required input and actual required input can be due to inefficiencies in labor or use of resources, or errors in the assumptions used to set input expectations. In manufacturing, efficiency variance can be used to analyze the effectiveness with respect to labor, materials, machine time and other production factors.
BREAKING DOWN 'Efficiency Variance'
An important factor in measuring efficiency variance is the development of a set of realistic assumptions surrounding the theoretical amount of inputs that should be required. If the actual amount of inputs used exceeds the amount theoretically required, there is a negative efficiency variance. On the other hand, if actual inputs are less than the amounts theoretically required, then there would be a positive efficiency variance. Since the baseline theoretical inputs are often calculated for the optimal conditions, a slightly negative efficiency variance is normally expected.

Yield Variance
Yield variance describes the difference between actual output ... 
Variance Swap
A variance swap allows counterparties to hedge or speculate directly ... 
Efficiency
Efficiency is a level of performance that uses the lowest amount ... 
Production Volume Variance
The amount of fixed overhead costs that are not allocated to ... 
Sales Mix Variance
Sales mix variance compares the actual mix of sales with the ... 
Variable Overhead Spending Variance
Variable overhead spending variance is the difference between ...

Trading
Exploring the Exponentially Weighted Moving Average
Learn how to calculate a metric that improves on simple variance. 
Retirement
The 3 Best Retirement Calculators For 2016
Find out the top three online retirement calculators to use in 2016 for determining how much you need to save to provide for sustainable income. 
Personal Finance
How budgeting works for companies
Budgeting is an integral part of running a business efficiently and effectively. Learn more about the two types of budgets that companies commonly use: static and flexible. 
Investing
Bet Smarter With the Monte Carlo Simulation
This technique can reduce uncertainty in estimating future outcomes. 
Investing
The Most "Wasteful" Industries
Some industries require a lot more input to produce their product, and investors should be aware of the impact. 
Investing
What's a Sensitivity Analysis?
Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable). 
Investing
Computing Historical Volatility in Excel
We examine how annualized historical volatility is computed from daily log returns, variance and standard deviation. 
Insights
Basic Concept Of Absolute Advantage
Absolute advantage is the ability of an individual, country or company to produce a good or service at a lower cost than any competitor. An entity with an absolute advantage requires fewer inputs ...

How do you calculate variance in Excel?
To calculate statistical variance in Microsoft Excel, use the builtin Excel function VAR. Read Answer >> 
How is productivity calculated?
Learn about productivity, what it measures and how to compute a company's productivity level by measuring its outputs relative ... Read Answer >> 
What's the difference between diminishing marginal returns and returns to scale?
Understand the main differences between the law of diminishing marginal returns and the concept of returns to scale through ... Read Answer >> 
What are some examples of ways that sensitivity analysis can be used?
Understand the concept of sensitivity analysis and learn about the wide variety of disciplines to which it can be applied. Read Answer >> 
What is the difference between variance and covariance?
Learn about the differences between covariance and variance, and how to use them to minimize your stock portfolio's risk ... Read Answer >> 
According to the CAPM, the expected return on a stock, that is part of a portfolio, ...
A. the covariance between the stock and the market. B. the variance of the market. C. the market risk premium. D. ... Read Answer >>