Can you compare variances?
If the variances are equal, the ratio of the variances will equal 1. For example, if you had two data sets with a sample 1 (variance of 10) and a sample 2 (variance of 10), the ratio would be 10/10 = 1. Therefore, your null hypothesis will always be that the variances are equal. …
What is the meaning of forecast error variance?
Forecast error variance decomposition (FEVD) is an econometric tool used by many economists in the vector autoregression (VAR) context for assessing the driving forces of business cycles. Therefore, it advocates employing a historical variance decomposition (HVD) of variables for business cycle analysis.
What does it mean when variances are higher than expected?
Favourable variances imply higher sales revenues or lower costs than expected; unfavourable mean worse than expected. This allows total variances to be investigated further in order to see what effect might have caused them. Sales price variance.
What does it mean to have a variance in sales?
The comparisons are known as variances and they can be Favourable variances imply higher sales revenues or lower costs than expected; unfavourable mean worse than expected. This allows total variances to be investigated further in order to see what effect might have caused them. Sales price variance.
What are the criteria for investigating a variance?
Typical criteria used to decide whether to investigate a variance are: The size of the variance (as a percentage of the budget figure). The sign of the variance. The likelihood that the variance can be controlled. The nature of the cost.
What does favourable usage / price / efficiency variance mean?
The favourable usage/price/efficiency variance means that the business has managed to buy more cheaply and/or used it more efficiently than expected (or some net effect). Fixed costs are fixed so no flexing is required to account for different activities.