Variance
In one sentenceThe difference between the actual amount and the amount estimated in the budget or the standard; it is favorable or unfavorable depending on its effect on profit.
Simply put
Every figure you planned before the period, such as sales, electricity or materials, you compare at the end with what actually happened. The difference between them is the variance.
A variance alone does not say something is wrong; it shows you where to look: if it raised profit it is favorable, and if it lowered profit it is unfavorable.
Worked example
A restaurant estimated its electricity expense for a month at 8,000 SAR, and the actual bill came to 9,500 SAR.
Actual expense9,500 SAR
Estimated expense8,000 SAR
Difference9,500 − 8,000 = 1,500 SAR
Variance (expense above the estimate)1,500 SAR unfavorable
Formula: Actual amount − Estimated amount
Don't confuse it with
Variance analysisA variance is a single figure; analysis breaks that figure down into its causes (price, quantity, efficiency) and identifies who is responsible for it.