Profit and Loss Variance

Chapter 20: Planning for Implementation - Page 20.8

Profit and Loss Variance

The following illustration, Plan vs. Actual Profit and Loss, shows the variance in expenses. The actual results are subtracted from the budget numbers, leaving negative numbers when the actual spending was more than budget or when the sales or profits were less than budget. Variances are calculated differently in different portions of the plan.

In expense rows, variance becomes the planned amount minus the actual amount. Lower expenses are a positive variance.
In the profits and sales areas, variance becomes actual amount minus planned amount. In these cases, higher sales are a positive variance.

Plan vs. Actual Profit and Loss (Variance)

The illustration shows a portion of the Profit and Loss Variance. March results showed sales below plan and costs also below plan, for a negative variance in Sales and a positive variance in Cost of Goods Sold. The result is a smaller negative variance in Gross Margin. This is a portion of the table.

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