IB Business Management Topic 3.9.3 Variances Revision Notes (HL)

IB Business Management Topic 3.9.3 Variances Revision Notes (HL) | RevisionDojo

Written by official IB examiners

Variances Are The Differences Between Budgeted and Actual Figures

You know when you planned to finish your assignment in two hours but end up spending eight on it?
Maybe you watched a little YouTube, got up for a snack, or simply underestimated how hard it would be to just "write that conclusion."
That's kind of like variance.
In business specifically, variance refers to the differences between your planned and actual expenses.

Definition

Variances

The difference between budgeted (planned) figures and actual financial performance, which can be either favourable or adverse.

Types of Variances

Variance helps managers understand how actual performance aligns with expectations, guiding strategic decisions.
There are several types of variance:

Favorable Variance

Occurs when actual performance exceeds expectations.
For instance:
1. Higher Revenue: Sales are higher than forecasted.
2. Lower Costs: Expenses are less than budgeted.

Note

Notice how variance is not always a bad thing.

Adverse Variance

Occurs when actual performance falls short of expectations.
For instance:
1. Lower Revenue: Sales are below forecasted levels.
2. Higher Costs: Expenses exceed the budget.

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Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Duis aute irure dolor in reprehenderit

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Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

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Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat.

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

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Variances Are The Differences Between Budgeted and Actual Figures

You know when you planned to finish your assignment in two hours but end up spending eight on it?
Maybe you watched a little YouTube, got up for a snack, or simply underestimated how hard it would be to just "write that conclusion."
That's kind of like variance.
In business specifically, variance refers to the differences between your planned and actual expenses.

Definition

Variances

The difference between budgeted (planned) figures and actual financial performance, which can be either favourable or adverse.

Types of Variances

Variance helps managers understand how actual performance aligns with expectations, guiding strategic decisions.
There are several types of variance:

Favorable Variance

Occurs when actual performance exceeds expectations.
For instance:
1. Higher Revenue: Sales are higher than forecasted.
2. Lower Costs: Expenses are less than budgeted.

Note

Notice how variance is not always a bad thing.

Adverse Variance

Occurs when actual performance falls short of expectations.
For instance:
1. Lower Revenue: Sales are below forecasted levels.
2. Higher Costs: Expenses exceed the budget.

Definition

Paywall

(on a website) an arrangement whereby access is restricted to users who have paid to subscribe to the site.

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Note

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam quis nostrud exercitation.

Excepteur sint occaecat cupidatat non proident

Tip

Lorem ipsum dolor sit amet, consectetur adipiscing elit.
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.
Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris.
Duis aute irure dolor in reprehenderit in voluptate velit esse cillum.

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

IB Business Management 3.9.3 Variances Notes

Unit 1: Introduction to Business Management - Core operational components and business functions6 subtopics

Unit 2: HR Management - Motivation, Structure, Hierarchy7 subtopics

Unit 3: Financial Management - Accounting, Ratio evaluation, Core Financial Documents9 subtopics

Unit 4: Marketing Management - The 7 P's, strategies and forecasting6 subtopics

Unit 5: Operations Management - Production Methods, Production planning and management9 subtopics

BM Toolkit - Core business frameworks and tools15 subtopics

Variances Are The Differences Between Budgeted and Actual Figures

Types of Variances

Favorable Variance

Adverse Variance

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account

Variances Are The Differences Between Budgeted and Actual Figures

Types of Variances

Favorable Variance

Adverse Variance

anim nostrud sit dolore minim proident quis fugiat velit et eiusmod nulla quis nulla mollit dolor sunt culpa aliqua

Duis aute irure dolor in reprehenderit

Excepteur sint occaecat cupidatat non proident

Unlock the rest of this chapter with a free account