Involves calculating and comparing differences between budgeted and actual figures and investigating possible reasons for any differences. Variance analysis is, ultimately, concerned with answering the following questions: How did we do? Was the variance significant? No one is going to worry if the budgeted figure was £1m and yet the actual figure was £1,000,050. How do we explain the variance and, in particular, was it caused by a factor we should have taken into account? Who, if anyone, is responsible for the variance? Obviously, some factors are beyond anyone’s control, but others are the result of failure to plan, or failure of implementation.