I need help with a Writing question. All explanations and answers will be used to help me learn.What is variance analysis? Why is it a valuable control process when done well?Answer the question then respond to the paragraph below separately.Variance analysis is the difference between what actually happened and what was expected to happen (Reiter & Song.pg.172). Variance analysis is a useful because it compares the standard to performance of an organization against actual results. Variance analysis aides in investigating the differences between what was planned and what actually happened during the month, quarter, year or whatever period of time an organization uses. I think variance analysis is valuable because it focusses on managerial budgeting and planning – it helps management figure out whether they are doing better compared to previous cycle performance. This is turn facilitates the decision-making process of any strategic changes or improvements that may need to occur.Variance analysis is an essential strategic tool to use because it starts with budget; what the organization plans to do, the activities they plan to be involved in, projects to invest in, personnel to be hired in necessary to accomplish the objectives, and the necessary costs associated with each. Thus, variance analysis emphasizes the need for continuous monitoring of the budget from the beginning to the end of the period. This aides in managerial financial accounting to determine whether the organization is making a profit or loss, and if a loss what adjustments are needed and how quickly those adjustments can be implemented. The outcome to strive for in variance analysis is that profitability is above standard expectations and that costs are less than anticipated. The result of this interpretation means that revenue is greater than expected and costs are less than expected, or at the very least that both equal to break even. Variance analysis helps an organization keep abreast of any cost changes in the market and how to better adjust in order to keep the organization profitable and solvent.Moreover, variance analysis helps an organization filter the most important aspects of operations that need significant improvement in order to function efficiently. It is also critical in accumulating detailed information about specific operations of the organization, what areas or services may need more capital, what may need less or be eliminated altogether. For instance, if supplies, materials, and equipment dramatically increase from the year before and revenue stays the same, variance analysis is important in determining this discrepancy. It gives management a chance to critically review data and adjust operations accordingly to effectively and efficiently manage revenues streams and expenses.
Requirements: 6-8 sentences each