The essence of budgetory control is comparing budgeted figures with performance.

• If performance is below the budgeted figure, it is known as a negative variance.

• If performance exceeds budgeted figure, it is known as positive variance.

 

 Since budgetory factors are of two types-

(a) Resources (including men, money, machines, markets)

(b) Goals (sales, inventory, expenditure, production),

It is obvious that a negative variance in expenditure matched by a positive variance in production is a sign to Monitoring Authority that cost control measures are being efficiently implemented.

 

Negative achievement data with respect to production, sales, collections etc. matched by zero variance in consumption of resources can mean that such resources are not being deployed in an optimum manner.

Either way, it reveals opportunities for improvement, one by identifying successful patterns of operation (for application throughout the organization) and two, identifying inefficient patterns, for applying corrective measures.