When analyzing budget variances to actuals, what are some of the % or $ thresholds used. My last company would require directors to explain variances that were either 10% plus or minus of actual or $10,000 plus or minus of actual, whichever was greater.
On 2 Dec 2005 13:44:51 -0800, in alt.accounting "julius snipped-for-privacy@yahoo.com" wrote in :
Whichever is greater? That's generous. I would look at most of these in the context of volume, often a department's costs can be spot on, but if volume dropped 7% below projection, that's not much satisfaction.
The variance triggers should vary by what level of the budget is being evaluated. If you are a project manager and have 20 people working on the project, any projected variance from the project should be flagged as soon as possible. If you are doing manufacturing, but 95% of your cost variance is related to fuel costs, then you would mention it, but it wouldn't be cause for immediate concern.
Ask yourself what is the worse case scenario. If every line item is down 10% who bad would the bottom line be? 2% is what most companies I have been with used to hold managers accountable.
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