The analysisreferred to as variance analysisgenerally involves decomposing (breaking down) the difference between standard and actual cost into two components. For direct material, the two components are the material price and the material quantity variances. For direct labor, the two components are the labor rate variance and the labor efficiency variance. And for manufacturing overhead, the two components are the overhead volume variance and the controllable overhead variance.

Variance analysis helps companies control operations by highlighting potential problems in operations.

How would you use the variance analysis process as it relates to your future career as a hairdresser/salon owner ?