Variance Analysis

⚠️ **Finance warning / Avertissement finance** : informational only, not investment advice. A variance is a question, not an answer: acting on a price variance that was really a market spike, or blaming a shift for a purchasing problem, wastes money and can cost people their standing, real losses follow from corrective actions aimed at the wrong cause, and no figure here is a promise of return or of savings. Curated by Skill Harbor: the standard cost variance analysis skill of GAJETOso/financeskills, written from the seat of a plant controller. Note the scope honestly: despite the general name, this skill is about manufacturing standard costing, the difference between actual and standard production costs, not budget variance in general. Use it on material price variance, labor efficiency, overhead variance, standard costing or production audit questions. The assessment fixes the standard inputs (standard price and standard quantity per unit, standard labor rate and standard hours per unit) and the actual results (actual price and quantity used, actual rate and hours worked). The framework splits the gap exactly: material price variance as standard minus actual price times actual quantity, material usage variance as standard minus actual quantity times standard price, labor rate variance as standard minus actual rate times actual hours, and labor efficiency variance as standard minus actual hours times standard rate. The technical steps then do the part the arithmetic cannot: root cause identification, separating a bad purchasing deal from a market spike on the price side, and machine downtime from poor training on the efficiency side, plus the fixed overhead spending variance and the fixed overhead volume variance for over or under absorption. The report is a production variance report with a summary dashboard (total variance marked favorable or unfavorable, and the primary driver, for example 70 percent of the variance driven by material price), the full variance table across material, labor and overhead, and corrective actions matched to the cause, such as retraining a shift or searching for a new supplier. References cover the variance formulas and absorption versus variable costing. From the GAJETOso/financeskills repository (MIT). Honest caveats: the formulas are exact, the root causes are hypotheses until the floor evidence confirms them, and standards that are stale or padded make every variance misleading. Skill Harbor never reviews the code, review it yourself before use.