What best describes a budget variance and recommended response?

• A. The difference between actual results and budgeted amounts; investigate causes, adjust forecasts, implement corrective actions.
• B. The difference between forecast and actual results; ignore.
• C. A variance that cannot be corrected.
• D. The difference only in revenue.

Answer: (A)

Budget variance is the difference between what actually happened and what was planned in the budget. When a variance exists, the best response is to investigate the causes, adjust forecasts to reflect new information, and implement corrective actions to bring performance back toward targets. This proactive approach helps control costs, improve resource use, and enhance future budgeting accuracy. Variances can arise in any area, not just revenue, so focusing on the underlying drivers—price changes, volume shifts, or efficiency factors—and taking appropriate actions is essential rather than ignoring the variance or assuming it cannot be corrected.