Planning variance
A planning variance is the portion of a total variance caused by the original standard being set incorrectly due to faulty forecasting or changed market conditions, rather than by operational performance during the period.
FrameworkEx-post variance analysis
See it move
A standard was originally set at €12.00 per unit, but a sharp shift in input prices means a realistic ex-post standard would have been €10.00. The €2.00 gap is the planning variance — across 10,000 units of actual output, that is €20,000 attributable to the forecast, not to how well operations were run. Ex-post analysis separates this from genuine efficiency and price variances.
The formula
Variables
- original standard cost per unit set before the period began (€ per unit)
- revised ex-post standard cost per unit reflecting conditions that actually arose (€ per unit)
- actual output produced during the period (units)
Isolates the portion of the total variance caused by an incorrectly set standard rather than by operational performance; not the responsibility of operational management.