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Money Bag

Unit 3 - Finance & accounts

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Chart Increasing

Unit 1 - Introduction To Business Management

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Briefcase

Unit 2 - Human Resource Management

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Direct Hit

Unit 4 - Marketing

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Factory

Unit 5 - Operations management

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Bar-Chart

Unit 6 - Assessment

It&#39;s like when you plan to spend $10 on candy, but end up spending $15 (because those gummy bears looked too tempting!). The difference of $5? That&#39;s your variance!

Basically, Sherlock Holmes mode for businesses. It&#39;s about looking at differences between what you thought would happen (budget) and what actually happened (real figures). This can be done for both 💰 (costs) and 🛍️ (sales).

&nbsp;Favourable Variance (👍)

When reality is better than what you expected! Like when you find an extra fry in your McDonald&#39;s bag.

<ul>
	<li>E.g. 1: Budgeted sales = $30,000 but Actual sales = $40,000. You got an extra $10,000!</li>
	<li>E.g. 2: Thought marketing would cost $80,000 but only spent $65,000. Saved $15,000!</li>
</ul>

Adverse Variance (👎)

When reality throws lemons at you (and you didn&#39;t even plan to make lemonade).

<ul>
	<li>E.g.: You expected to earn $100 from a garage sale, but it rained and you only made $50. That $50 shortfall is your adverse variance.</li>
</ul>

Imagine you&#39;re playing a game where + points are good and - points are bad:

<ul>
	<li>Positive Income = +$45 million (You&#39;re on fire!🔥)</li>
	<li>But, Overspent by = -$15 million (Ouch!😬) Overall, you&#39;re still up by +$30 million! (Victory dance 💃)</li>
</ul>

Real World Example: Mr. Kamau&rsquo;s business

<ul>
	<li>📺 Sold more TVs than expected. +$2,500! (Maybe there was a big sports event?)</li>
	<li>🧰 Material costs were lower than expected by $200. (Hooray for discounts!)</li>
	<li>💻 OOPS! Sold fewer laptops than expected. -$1,100 (Did a new model launch somewhere else?)</li>
	<li>👷 Labour costs rose by $700. (Maybe everyone wanted raises?)</li>
</ul>

To Remember: Variance analysis is like your report card for the business. Sometimes you ace the test, and sometimes you don&#39;t. But always learn and adapt!

&nbsp;

Study Tip: Relate these concepts to your own budgeting. Ever saved more than you planned or spent a bit more on that cool hoodie? That&#39;s variance in real life! 🌍📈

Mastering Variance Analysis: Favorable Vs. Adverse Insights

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Higher Level

Business Management HL

Unit 3 - Finance & accounts

Mastering Variance Analysis: Favorable Vs. Adverse Insights

Table of content

🔍 What's variance?

👉 Variance analysis

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Unit 3 - Finance & accounts

Mastering Variance Analysis: Favorable Vs. Adverse Insights

Table of content

🔍 What's variance?

👉 Variance analysis

Unlock the Full Content!