Variance analysis in budgeting describes:

• A. A comparison of actual results to the budget.
• B. A method for forecasting revenue only.
• C. A technique to allocate costs across departments.
• D. A tool to valuate asset impairment.

Answer: (A)

Variance analysis in budgeting focuses on comparing what was planned in the budget with what actually occurred and then examining why any differences exist. This approach helps managers see not just that a variance happened, but how big it is and in which direction (favorable or unfavorable), so they can investigate causes such as changes in volume, price, or efficiency and decide whether to take corrective actions or adjust future plans. The key idea is to use the comparison of actual results to the budget to understand performance and drive better budgeting and control.

The described process fits best because it directly involves evaluating actual results against the budget. It isn’t limited to forecasting revenue, nor is it a method for simply allocating costs across departments, and it isn’t a tool for asset impairment valuation—each of those is a different accounting concept.