What is variance?

Answer 1

In most production management systems, a "Planned" quantity and material cost is calculated based on the associated Bill of Materials (BOM) and Operatons being performed (Route) creating labor and overhead related costs. The "Actual" quantities, material costs, and labor/overhead costs are issued to a Work in Process (WIP) account and the quantities/values of the produced items are recieved from the WIP account. A variance usually occurs when there is a difference between the issued material cost plus labor and overhead and the recieved material cost of the produced item. The reasons for these variances can be differences in planned vs actual quantities, differences in system or planned cost of materials, labor, or overhead vs actual cost, or any other potential reason for an unplanned difference.

Answer 2

The variance of a random variable is a measure of its statistical dispersion, indicating how far from the expected value its values typically are (Wikipedia 2006). The variance of a real-valued random variable is its second central moment, and it also happens to be its second cumulant (Wikipedia 2006). The variance of a random variable is the square of its standard deviation (Wikipedia 2006).

Variance is the difference between what is expected and the actuals. it is the difference between "should take" and "did take". The deviation from the actuals is called variance. Variance can be of two types positive and negative.