variances + and -

Stackers
Stackers Registered Posts: 2 New contributor ?
Please can anyone advise me because I feel I have been given totally conflicting views!!
When calculating variances on sales a company has made for e.g
May 07 22000
May 08 23000
The variance is 1000, now is this a plus because the company has benefitted by 1000 or because the figure has increased?
And on Expenses
May 07 22000
May 08 23000
The variance is again 1000, now is this a plus cause the figure has gone up, or a negative because the company has paid out more expense.
The practice simulations and tests seem to all say different ways!!!!!
I am unsure whether you have to calculate it looking at it from the company's view or as the figures rise or fall!
Please help..........
Thanks
:001_smile:

Comments

  • Gem7321
    Gem7321 MAAT, AAT Licensed Accountant Posts: 1,438
    Stackers wrote: »
    Please can anyone advise me because I feel I have been given totally conflicting views!!
    When calculating variances on sales a company has made for e.g
    May 07 22000
    May 08 23000
    The variance is 1000, now is this a plus because the company has benefitted by 1000 or because the figure has increased?
    And on Expenses
    May 07 22000
    May 08 23000
    The variance is again 1000, now is this a plus cause the figure has gone up, or a negative because the company has paid out more expense.
    The practice simulations and tests seem to all say different ways!!!!!
    I am unsure whether you have to calculate it looking at it from the company's view or as the figures rise or fall!
    Please help..........
    Thanks
    :001_smile:

    So on sales the variance is +1000 which is FAVOURABLE - it has a positive effect on the profitability of the company
    The expenses variance is also +1000 but is ADVERSE - it has a negative effect on the profitability
  • Stackers
    Stackers Registered Posts: 2 New contributor ?
    Thanks

    Thanks that is really helpful. I think I am finally getting my head around these now :)
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