Variance reconciliation statement
Variance reconciliation statement: a statement reconciling budgeted profit to actual profit by listing every favourable and adverse variance in between.
See it move
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A toy manufacturer budgets €50,000 profit. Its variances net to €1,100 favourable: sales variances net €2,800 favourable, material variances net €1,100 adverse, labour variances net €900 adverse, and the fixed overhead expenditure variance adds €300 favourable. Reconciled actual profit is €50,000 + €1,100 = €51,100. If the statement does not land on actual profit, a variance was missed or mis-signed upstream.
Where it fits
SubjectManagerial AccountingAdvancedTopicBudgeting & the Master BudgetAdvancedTopicStandard Costing & Variance AnalysisAdvanced
The formula
LaTeX
Variables
- Actual profit for the period (€)
- Budgeted profit for the period (€)
- Sum of all favourable variances (€)
- Sum of all adverse variances (€)
Reconciles budgeted profit to actual profit by netting every favourable and adverse variance computed for the period.