Operational variance
An operational variance is the portion of a total variance within management's control, measured against a revised ex-post standard that reflects actual market conditions rather than the original plan.
FrameworkEx-post variance analysis
See it move
When a raw material's market price rises 15 per cent above the original standard, splitting the total price variance matters. The planning variance captures the 15 per cent shift in market conditions — no manager could have prevented it. The operational variance then measures whether purchasing paid the new market rate or paid above it, isolating the part genuinely within management's control.
The formula
Variables
- revised ex-post standard cost per unit reflecting conditions that actually arose (€ per unit)
- actual cost per unit incurred during the period (€ per unit)
- actual output produced during the period (units)
Positive result is favourable. Benchmarked against the revised standard rather than the original plan, giving a fairer measure of what operational management could control.