Budget Variance Calculator
On the sample plan, net income lands $3,750.00 under budget (−15.00%). Enter your budget and actual amounts to see which lines moved it.
Last reviewed
Net income variance and line-by-line results
Net income variance
-$3,750.00
Actual net income
$21,250.00
Net income is $21,250.00 against a $25,000.00 budget: −$3,750.00 (−15.00%), unfavorable.
Revenue is $100.00 above budget (+0.11%), and expenses are $3,850.00 above budget (+5.75%).
The largest gain is Product sales (+$1,600.00), and the largest drag is Cost of goods sold (−$4,000.00).
Together the 6 lines are $8,150.00 away from budget; the 3 lines that reach 10.00% make up 73.01% of that.
Revenue and expense lines: budget and actual
- Budget net = $92,000.00 − $67,000.00 = $25,000.00
- Revenue variance = +$100.00
- Expense variance = +$3,850.00
- Percent = −$3,750.00 ÷ $25,000.00 = −15.00%
- Net income variance = $21,250.00 − $25,000.00 = −$3,750.00
- Actual net = $92,100.00 − $70,850.00 = $21,250.00
Net income impact of each line
Variance by line
| Line | Type | Budget | Actual | Variance (actual − budget) | Net income impact | Variance % | Result |
|---|---|---|---|---|---|---|---|
| Product sales | Revenue | $80,000.00 | $81,600.00 | $1,600.00 | $1,600.00 | 2.00% | Favorable |
| Service revenue | Revenue | $12,000.00 | $10,500.00 | -$1,500.00 | -$1,500.00 | -12.50% | Unfavorable |
| Cost of goods sold | Expense | $36,000.00 | $40,000.00 | $4,000.00 | -$4,000.00 | 11.11% | Unfavorable |
| Wages | Expense | $22,000.00 | $21,400.00 | -$600.00 | $600.00 | -2.73% | Favorable |
| Rent | Expense | $6,000.00 | $6,000.00 | $0.00 | $0.00 | 0.00% | On budget |
| Marketing | Expense | $3,000.00 | $3,450.00 | $450.00 | -$450.00 | 15.00% | Unfavorable |
Lines by result: 2 favorable, 3 unfavorable, 1 on budget. Favorable lines add $2,200.00 and unfavorable lines subtract $5,950.00, which nets to −$3,750.00. Marketing has the biggest percent gap (+15.00%) but moves net income by $450.00, while Cost of goods sold moves it by $4,000.00.
Revenue, expenses, and net income
| Category | Budget | Actual | Variance (actual − budget) | Net income impact | Variance % | Result |
|---|---|---|---|---|---|---|
| Total revenue | $92,000.00 | $92,100.00 | $100.00 | $100.00 | 0.11% | Favorable |
| Total expenses | $67,000.00 | $70,850.00 | $3,850.00 | -$3,850.00 | 5.75% | Unfavorable |
| Net income | $25,000.00 | $21,250.00 | -$3,750.00 | -$3,750.00 | -15.00% | Unfavorable |
Revenue variance +$100.00 minus expense variance +$3,850.00 gives the −$3,750.00 net income variance. Net income is 27.17% of revenue in the budget and 23.07% in the actual.
Review list by screen: how many lines reach each percent gap
| Screen | Lines kept | Unfavorable | Favorable | Gap kept | Share of all gaps |
|---|---|---|---|---|---|
| Any gap in dollars | 5 | 3 | 2 | $8,150.00 | 100.00% |
| At least 2.50% | 4 | 3 | 1 | $6,550.00 | 80.37% |
| At least 10.00% | 3 | 3 | 0 | $5,950.00 | 73.01% |
| At least 12.50% | 2 | 2 | 0 | $1,950.00 | 23.93% |
| At least 15.00% | 1 | 1 | 0 | $450.00 | 5.52% |
| At least 25.00% | 0 | 0 | 0 | $0.00 | 0.00% |
Moving the screen from any gap to 10.00% cuts the list from 5 lines to 3 lines and keeps $5,950.00 of the $8,150.00 (73.01%); at 25.00% it holds 0 lines.
How a budget variance and its favorable or unfavorable label work
A budget variance is the gap between what you planned and what happened. For each line, this calculator subtracts the budget from the actual amount, in whole cents. A sales line planned at $80,000.00 that comes in at $81,600.00 has a variance of +$1,600.00, or +2.00% of its budget.
A plus sign is not always good news. OpenStax Principles of Accounting, Volume 2, Section 7.5, sets the labels: "A favorable variance occurs when revenue is higher than budgeted or expenses are lower than budgeted. An unfavorable variance is when revenue is lower than budgeted or expenses are higher than budgeted." So the tables show two money columns. Variance is actual minus budget. Net income impact is the variance for a revenue line and the opposite for an expense line. Cost of goods sold at $40,000.00 against a $36,000.00 budget is $4,000.00 over budget, so its impact on net income is −$4,000.00.
Percent variance divides the dollar gap by the size of the budget and rounds half up to 0.01%. None of the sources on this page fixes that base, so it is FastCalc's choice. Dividing by the absolute value of the budget keeps the sign honest when the budgeted net income is a loss. A line with a $0.00 budget has no percent, because dividing by zero has no answer. The table says so, and the dollar gap and the label still show.
Net income is revenue minus expenses. The net income variance is actual net income minus budgeted net income. That also equals the revenue variance minus the expense variance, and the net income impacts of all lines add up to it. On the sample plan, +$100.00 of revenue variance minus +$3,850.00 of expense variance gives −$3,750.00.
Which budget lines to look at first
Start with dollars, then use percents to spot small lines that drifted. On the sample plan, Marketing has the biggest percent miss among the expense lines (+15.00%), but it costs $450.00. Cost of goods sold is +11.11% over and costs $4,000.00. Sorting by percent alone sends you to the smaller problem first.
Totals can hide offsetting lines. Total revenue is only $100.00 above budget (+0.11%), yet Product sales beat the plan by $1,600.00 while Service revenue missed it by $1,500.00. The two lines moved $3,100.00 between them. Check each line before you call a total on budget.
A screen narrows the list. The review-list table keeps the lines whose gap reaches 2.50%, 10.00%, 12.50%, 15.00% or 25.00% of their budget. It uses the percent as the table shows it. The first row keeps any gap in dollars, even one cent. On the sample plan, 3 of 6 lines reach 10.00%, and they make up 73.01% of the $8,150.00 that all lines moved. These cut-offs are FastCalc's. No source sets them as limits. A $0.00 budget has no percent, so every screen keeps that line unless its actual is also zero.
Video walkthrough
A 3½-minute walkthrough of a budget variance on the sample plan: net income against budget, the lines behind a total, favorable and unfavorable labels, dollars before percents, and a fixed plan against a flexed plan.
Read the transcript
Net income against budget
0:00 Did the business hit its budget?
0:02 On the page's sample plan, net income lands $3,750 under budget, about 15% short.
0:10 Every line has a budget and an actual amount.
0:13 The variance is the actual amount minus the budget.
0:16 Revenue minus expenses gives net income.
0:19 It was planned at $25,000 and came in at $21,250.
0:25 The page's worked sheet shows the steps.
0:28 Actual net income minus budgeted net income is the net income variance.
Totals hide lines
0:34 Total revenue looks fine.
0:35 It is barely above its budget, so the plan seems on track.
0:39 But different lines sit behind that total.
0:42 Product sales beat the plan by $1,600, and service revenue missed it by $1,500.
0:50 Those lines almost cancel out.
0:52 Check each line before you call a total on budget.
Favorable or unfavorable
0:55 A plus sign is not always good news.
0:58 OpenStax, an accounting textbook, says a favorable variance is revenue above budget or expenses below it.
1:05 Each line also has a net income impact.
1:08 A positive impact adds to net income.
1:11 A negative impact cuts it.
1:13 The page's chart draws the same impacts as bars.
1:16 Cost of goods sold drops furthest below zero.
1:20 Cost of goods sold ran $4,000 over budget, so it is unfavorable.
1:25 Wages ran $600 under budget, so they are favorable.
Dollars before percents
1:30 Percents can mislead.
1:31 Marketing has the biggest percent variance, about 15% over budget, but that is only $450.
1:39 Cost of goods sold is about 11% over, and that is $4,000.
1:44 So start with the dollars.
1:46 Then use percents to find small lines that drifted, and look at those next.
A shorter review list
1:51 To shorten the review list, screen the lines by percent variance.
1:55 Each higher screen keeps fewer lines.
1:58 A 10% screen keeps 3 of the 6 lines.
2:01 Those lines hold $5,950 of the $8,150 that all lines are away from budget.
2:09 That is about 73% of it.
2:11 The screens only sort your list.
2:13 They are not limits.
Change a line
2:15 Now change a number.
2:17 Suppose cost of goods sold, the first expense line, had stayed on budget.
2:21 Edit the expense actual amounts, then press Calculate.
2:25 The page recalculates.
2:27 Net income now lands $250 over budget.
2:31 One line decided the result for the whole plan.
Fixed or flexed plan
2:34 In an OpenStax example, a bike trainer maker sold 1,400 units against 1,500 planned.
2:42 A fixed plan can mislead when volume changes like that.
2:46 Both plans use the same actual net income, $22,915.
2:52 Against the fixed plan, net income is $4,835 under budget, about 17% short.
3:00 Against a plan flexed to the units sold, it is $215 over.
3:05 The sign flips because the fixed plan counted units that were never sold.
3:10 Compare with the plan that matches your volume.
3:13 So remember: check every line, not only the total, and compare each against the right plan.
3:18 Try your own lines at fastcalc.us.
Variance, percent variance, and net income formulas
variance = actual − budget variance % = variance ÷ |budget| net income impact = +variance (revenue line), −variance (expense line) net income = revenue − expenses net income variance = actual net income − budgeted net income = revenue variance − expense variance
Worked budget variance examples
Direct material in the textbook sample. The actual cost is $5,550.00. Against the static budget of $6,000.00, the variance is −$450.00 (−7.50%), which is favorable. Against the budget flexed to 1,400 units, $5,600.00, it is −$50.00 (−0.89%), still favorable. Of the $450.00 gap, $400.00 comes from planning for 100 fewer units.
An unbudgeted grant. Enter a revenue line with a $0.00 budget and $2,500.00 of actual receipts. The variance is +$2,500.00, favorable, and the net income impact is +$2,500.00. The percent column reads No budget to compare, and every screen keeps the line.
Where budget comparisons appear on tax forms and in federal filings
You can build a budget from the lines you file. The Instructions for Schedule C (Form 1040) (2025) say for Line 1: "Enter gross receipts from your trade or business." IRS Publication 334 (2025), chapter 7, goes on: "Next, subtract the cost of goods sold (line 4) from net receipts (line 3). The result is the gross profit from your business." Chapter 9 turns to the bottom line: "After figuring your business income and expenses, you are ready to figure the net profit or net loss from your business. You do this by subtracting business expenses from business income." Enter receipts as a revenue line and each cost as an expense line to preview a Schedule C year.
Publication 334, chapter 7, describes an accuracy test for retail and wholesale businesses. Divide gross profit by net receipts and compare the percentage with your markup policy. It adds: "A large difference between these percentages may show that you did not accurately figure sales, purchases, inventory, or other items of cost." You can apply the same ratio to a budget. Use net receipts as the only revenue line and cost of goods sold as the only expense line. The net income percentage in the note under the revenue-expenses table is then the gross profit percentage.
Federal grants make a budget comparison a duty. Under 2 CFR 200.302(b)(5), a recipient's financial management system must provide for "Comparison of expenditures with budget amounts for each Federal award." Under 2 CFR 200.308(b), a recipient or subrecipient must report deviations from the approved budget, in line with § 200.329. Read your award terms before you rely on any screen from this page.
The 10 percent in 2 CFR 200.308(i)(2) is not a variance limit. Under 2 CFR 200.308(i), a federal agency may, at its option, restrict transfers of funds among direct cost categories. That applies when the Federal share of the award exceeds the simplified acquisition threshold and "The cumulative amount of a transfer exceeds or is expected to exceed 10 percent of the total budget, including cost share, as last approved by the Federal agency."
17 CFR 229.303(b) asks public companies to explain period-to-period changes. It says: "Where the financial statements reflect material changes from period-to-period in one or more line items, including where material changes within a line item offset one another, describe the underlying reasons for these material changes in quantitative and qualitative terms." Offsetting changes matter in a budget review too, and the Variance by line table shows them.
Static budgets and flexible budgets: the textbook sample
This calculator compares actual results with one fixed plan. OpenStax Section 7.4 calls that a static budget: "A static budget is one that is prepared based on a single level of output for a given period." If your volume changed, the plan should change too. The same section says: "A flexible budget is one based on different volumes of sales. A flexible budget flexes the static budget for each anticipated level of production."
OpenStax Section 7.5 works one quarter for a maker of bike trainers, who sold 1,400 units against 1,500 planned. Against the static budget, net income of $22,915.00 is $4,835.00 below the $27,750.00 plan (−17.42%). Against a budget flexed to 1,400 units, the same results beat the $22,700.00 plan by $215.00 (+0.95%). Enter either plan as the budget to reproduce the book's variances. The book prints dollars, and the percents are FastCalc's.
The sign flips because the static plan counted 100 more units. Direct labor shows it: $1,000.00 favorable against the static plan, $500.00 unfavorable against the flexed plan. OpenStax Section 7.5 puts it this way: "A static budget does not evaluate whether costs for 1,400 were appropriate for production of those 1,400 units." To flex your own plan, re-price each cost at the units you really sold and enter that as the budget.
A budget variance applies the same idea to a plan instead of a standard cost. OpenStax Section 8.1 defines the term it starts from: "A variance is the difference between a standard cost and actual performance." Splitting a cost gap into price and quantity needs a standard cost per unit, which this page does not model.
Assumptions and limits of this budget comparison
- Amounts are dollars and cents, with at most 2 decimals, from $0.00 to $1,000,000,000,000.00 on each line, and 1 to 10 lines in all. Type each amount on its own line. Net out returns and rebates inside a line first. IRS Publication 334 (2025), chapter 7, does this when it subtracts returns and allowances from gross receipts to reach net receipts.
- Each line compares one period with one fixed plan. The calculator does not flex a budget for volume or split a cost gap into price and quantity.
- Percent variances follow the convention explained under How a budget variance works, which none of the cited sources sets.
- The percent screens only sort your list. They are not limits and not benchmarks.
- Timing is not adjusted. A prepaid annual cost or a late-paid invoice counts in the period you enter it, so this page does not show cash.
- Net income here is revenue minus the expense lines you enter. If your budget includes taxes, interest or depreciation, enter them as expense lines, as the textbook sample does with income taxes.
These figures are estimates for learning and planning, not financial, tax, legal or investment advice. Terms of use.
What to do with your budget variances
The line with the biggest dollar impact deserves the first look. On the sample plan, Cost of goods sold takes $4,000.00 off net income, most of the $5,950.00 that the three unfavorable lines take. If wages are the line that moved, the time card calculator checks the hours behind the pay.
Volume can explain a spending gap before management does. In the textbook sample, the static budget shows −$4,835.00 where the flexed budget shows +$215.00. Re-pricing each cost at the units you really sold, and entering that as the budget, gives the flexed comparison. If a shortfall repeats, the emergency fund calculator sizes the cash reserve to cover it.
Your Schedule C year can be checked the same way. Enter net receipts as revenue and cost of goods sold as the only expense. Take a budget of $300,000.00 receipts and $200,000.00 cost of goods sold. Publication 334 uses these round figures in its markup example. Then enter a year of $280,000.00 receipts and $195,000.00 cost of goods sold. Gross profit falls from 33.33% to 30.36% of receipts, a $15,000.00 shortfall.
A lasting gap changes the tax picture too. If the sample plan's $21,250.00 of net income is a sole proprietor's Schedule C profit, the self-employment tax calculator shows the tax on it. The quarterly estimated tax calculator spreads the payments. If you bill by the hour, the freelance hourly rate calculator shows the rate that a different profit target needs.
Budget variance questions
How do you calculate budget variance?
Subtract the budget from the actual amount: variance = actual − budget. Divide the result by the budget for a percent. Wages of $21,400.00 against a $22,000.00 budget give −$600.00, or −2.73%, and because wages are a cost, that is favorable.
Is a positive budget variance good or bad?
It depends on the line: on the sample plan, Product sales are +$1,600.00 over budget (favorable), and Cost of goods sold is +$4,000.00 over (unfavorable). Even a favorable gap needs a look, since OpenStax Section 7.5 says: "Variance analysis helps the manager analyze its results. It does not necessarily find a problem, but it does indicate where a problem may exist."
What is a good budget variance percentage?
None of the sources on this page sets one, and it depends on how steady the line is. The review-list table lets you try several screens. On the sample plan, moving from 2.50% to 15.00% cuts the list from 4 lines to 1 line.
How do you calculate variance percentage when the budget is zero?
You cannot, because dividing by $0.00 has no answer. The table shows No budget to compare and still gives the dollar gap and the label. An unplanned $500.00 repair is +$500.00 over a $0.00 budget, unfavorable, and it cuts net income by $500.00.
How do you find the variance when the budgeted net income is a loss?
Divide by the size of the budgeted loss, not by the negative number. A plan of $1,000.00 in sales and $2,000.00 in costs is a −$1,000.00 loss. If sales reach $1,500.00, the loss is −$500.00 and the variance is +$500.00, which is +50.00% favorable. Dividing by −$1,000.00 would print −50.00% and call good news bad.
What is the difference between a static and a flexible budget variance?
A static budget keeps one planned level of output, and a flexible budget re-prices costs at the units you really sold. In the OpenStax sample, direct labor falls from $22,500.00 to $21,000.00 when the plan drops 100 units. Fixed manufacturing overhead stays $29,000.00 in both plans. Only the flexed plan tests costs against the units sold.
Why is my total on budget when single lines are not?
Gaps in opposite directions cancel in a total. In the flexed textbook sample, Direct labor is $500.00 over and Fixed sales and admin is $500.00 under, so those lines net to $0.00. Check each line before you trust a total.
Sources
- OpenStax, Principles of Accounting, Vol. 2, Section 7.5, Explain How Budgets Are Used to Evaluate Goals (page modified Feb 14, 2019)
- OpenStax, Principles of Accounting, Vol. 2, Section 7.4, Prepare Flexible Budgets (page modified Feb 14, 2019)
- OpenStax, Principles of Accounting, Vol. 2, Section 8.1, Explain How and Why a Standard Cost Is Developed (page modified Feb 14, 2019)
- 2 CFR 200.302, Financial management (OMB Uniform Guidance for Federal Awards) (page modified Oct 30, 2026)
- 2 CFR 200.308, Revision of budget and program plans (OMB Uniform Guidance) (page modified Oct 30, 2026)
- 17 CFR 229.303, (Item 303) Management's discussion and analysis of financial condition and results of operations (page modified Oct 30, 2026)
- IRS, Publication 334 (2025), Tax Guide for Small Business (page reviewed Apr 30, 2026)
- IRS, Instructions for Schedule C (Form 1040) (2025), Profit or Loss From Business (page reviewed Apr 30, 2026)
More in Planning & Cash Flow Calculators and Small Business Calculators.