Enter the forecasted budget and the actual eventual cost into the calculator to determine the budget variance. The calculator will display the absolute variance and the percentage variance.
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Budget Variance Formula
The following formulas are used to calculate a budget variance.
BV = ( A-F/A )*100
AB = A - F
- Where B% is the budget percentage variance
- AB is the absolute variance
- A is the actual budget cost or actual outcome
- F was the forecasted budget
To calculate budget variance, simply subtract the forecasted budget from the actual budget.
Budget Variance Definition
A budget variance is defined as either the percentage or absolute difference between a forecasted budget and the actual cost or budget that occurred.
Most often it makes sense to look at this in terms of a percentage. Then companies can analyze and compare the variance to other budgets.
How to calculate budget variance?
Example Problem #1
In this first problem, we have a new startup company that is designing a new website for their online store.
First, the original budget is laid out. For this example, the budget was determined to be $50,000.00 for the creation of the online store.
Next, after the project is complete the actual cost is determined to be $75,000.00.
Finally, using the formula for budget variance, the variance can be calculated as
B% = 75,000-50,000/50,000 *100
= 50% budget variance
Example Problem #2
In this next example, a construction team is working on a new home to be built. The original budget laid out is $300,000.
After completion of the home and a few setbacks, the total cost comes out to $400,000.
The absolute budget variance is calculated by subtracting the cost from the forecasted budget
BV = $300,000 – $400,000 = -$100,000.00
The budget variance percentage can then be calculated as:
BV% = $100,000 / $300,000 * 100 = 33.3%