budget-variance-analysis
Installation
SKILL.md
Overview
Based on "Cost Accounting: A Managerial Emphasis" by Horngren, Datar, and Rajan - the standard reference for management accounting and variance analysis. Variance analysis is not about flagging numbers that are off; it is about explaining why they are off in a way that leads to a decision.
Horngren's principle: decompose variances into their components (price, volume, mix, efficiency) before drawing conclusions. A single unfavorable revenue variance could be caused by lower prices, lower volume, or a worse product mix - and each cause has a completely different corrective action.
Workflow
Step 1: Establish the variance summary
Before decomposing, calculate the total variance for each line and flag direction.
VARIANCE SUMMARY - [Period]