The concept of variance is intrinsically connected with planned and actual results and effects of the difference between those two on the performance of the entity or company.
Variances can be divided according to their effect or nature of the underlying amounts.
Variance analysis is usually associated with explaining the difference (or variance) between actual costs and the standard costs allowed for the good output.
The difference between the actual direct labor costs and the standard direct labor costs can be divided into a rate variance and an efficiency variance.
The difference in manufacturing overhead can be divided into spending, efficiency, and volume variances.