Which of the following does variance analysis assist businesses in identifying?

Variance analysis is a key tool used in financial and operational management that helps businesses identify discrepancies between actual performance and expected performance. This analysis involves comparing actual financial outcomes to budgeted figures, allowing organizations to pinpoint areas where they are underperforming or outperforming.

By focusing on specific variances—whether they be in revenue, expenses, or other operational metrics—businesses can gain insights into why those differences exist. For example, if actual spending on materials is significantly higher than budgeted, this could signal inefficiencies in the supply chain or increased costs that might need to be addressed. Conversely, if sales exceed projections, it might highlight successful market strategies that could be expanded upon.

While variance analysis can indirectly support employee evaluations or compliance measures by providing information about overall performance, its primary purpose is not to focus on market trends or regulatory compliance directly. Instead, it is centered on understanding performance metrics that reveal improvement opportunities, thus making it a vital aspect of strategic planning and operational efficiency.