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How is variance used to measure risk?
In finance, risk of investments may be measured by calculating the variance and standard deviation of the distribution of returns on those investments. Variance measures how far in either direction the amount of the returns may deviate from the mean.
How is this relevant to marketing Assume the frequency that a household purchases milk per year is a normal distribution with a mean of 12. Over time the mean stays the same but the variance decreases?
It should make marketing easier because the amount purchased has a smaller variance. This means that the numbers are closer to 12 and so there is less of a need to carry large stocks for when the demand is high.
Advantages of variance analysis?
As you may know that variance analysis is intrinsically connected with planned and actual results and effects of the difference between those two on the performance of the entity or company. This variance analysis can lead to the identification of certain types of task that frequently overrun their budget whilst other tasks may be seen to regularly come in under their budget. Occurrences such as these require further investigation in order to identify potential efficiency gains. The major problem with a variance analysis approach to project monitoring is the amount of time it takes to establish actual costs. On the majority of large projects, supported by a typical accounts department, there will be a time lag of around 6 weeks before spend information can be accurately reported. The shortcomings and disadvantages of VA can be addressed below: The monitoring cycle can be so long that it renders the application of control impossible. Typically, by the time a problem has been identified through variance analysis it is too late to take corrective action. This is a major shortcoming of variance analysis and highlights the need for a monitoring system that depicts the current status of the project more effectively.
What is the Difference between favourable and adverse variance?
At the start of fiscal period every organisation prepares budgets for the coming period and then use the same estimated budget at the end of fiscal year to evaluate the performence in the fiscal year. When actuall amount for any activity is utilized less then the budgeted amount estimated for the same activity at the start of the fiscal year and perform the same activity accurately as estimated at start of period with less amount then it is called favourable variance and vice versa.
How do you explain the analysis of variance assuming that your audience has not had a statistic class before?
The measurement of any statistical variable will vary from one observation to another. Some of this variation is systematic - due to variations in some other variable that "explains" these variations. There may be several such explanatory variables - acting in isolation or in conjunction with one another. Finally, there will be a residual variation which cannot be explained by any of these "explanatory" variables. The statistical technique called analysis of variance first calculates the total variation in the observations. The next step is to calculate what proportion of that variation can be "explained" by other variables, and finding the residual variation. A comparison of the explained variation with the residual variation is an indicator of whether or not the amount explained is statistically significant. The word "explain" is in quotes because there is not always a causal relationship. The causality may go in the opposite direction. Or the variables may be related to another variable that is not part of the analysis.
What is difference between the amount budgeted and the actual amount is called?
Difference between actual amount and budgeted amount is called "Variance" and variance analysis is done to find out the reasons for variance
What is Proportion of variance unaccounted?
The unaccounted for variance aka Error Variance, is the amount of variance of the dependent variable (DV) that is not accounted for by the main effects/independent variables (IV) and their interactions.
1600 budget 1595 actual amount percent of variance?
If the budgeted amount is 0 and the actual amount is $300, what is the variance percentage?
What is a positive or negative variance of a budget?
A variance is the difference between the projected budget and the actual performance for a particular account. A negative variance means that the budgeted amount was greater than the actual amount spent. A positive variance means that the budgeted amount was less than the actual amount spent. Note there is some debate over whether a negative variance means an underrun or an overrun. The Project Management Institute, however, endorses the accepted convention that a negative variance is a bad thing, and a positive variance a good thing.
What are the causes direct material quantity variance?
what are some of the causes of material quntity variance of favourable amount
How do you do variance?
you have to first find the Mean then subtract each of the results from the mean and then square them. then you divide by the total amount of results and that gives you the variance. If you square root the variance you will get the standard deviation
How do you work out variance?
you have to first find the Mean then subtract each of the results from the mean and then square them. then you divide by the total amount of results and that gives you the variance. If you square root the variance you will get the standard deviation
What does the word variance mean?
difference; change, or amount of change
How is variance used to measure risk?
In finance, risk of investments may be measured by calculating the variance and standard deviation of the distribution of returns on those investments. Variance measures how far in either direction the amount of the returns may deviate from the mean.
Why variance is bigger than standard deviation?
The variance is standard deviation squared, or, in other terms, the standard deviation is the square root of the variance. In many cases, this means that the variance is bigger than the standard deviation - but not always, it depends on the specific values.
When you have budjeted amount actual accrued and actual expended amount then formula for budget variance?
I have NO idea what your asking but Sure :) You can.
If actual overhead for the year is 33451 and applied overhead is 32000 is the overhead variance over applied or under applied assuming the amount is immaterial how would you dispose of the variance?
Difference between actual overhead and applied overhead is as follows: Difference = 33451 - 32000 = 1450 Difference of variance will be charged to income statement.
