variance-analysis

Name: variance-analysis
Author: anthropics

2.2kinstalls2.7kforks

How to install variance-analysis?

anthropics/knowledge-work-plugins/variance-analysis

$npx -y skills add anthropics/knowledge-work-plugins --skill variance-analysis

Installs into the current project.

Summary

Decompose financial variances into drivers with narrative explanations and waterfall analysis. Use when analyzing budget vs. actual, period-over-period changes, revenue or expense variances, or preparing variance commentary for leadership.

Files · 1

View on GitHub

SKILL.md

1	# Variance Analysis
2
3	Important: This skill assists with variance analysis workflows but does not provide financial advice. All analyses should be reviewed by qualified financial professionals before use in reporting.
4
5	Techniques for decomposing variances, materiality thresholds, narrative generation, waterfall chart methodology, and budget vs actual vs forecast comparisons.
6
7	## Variance Decomposition Techniques
8
9	### Price / Volume Decomposition
10
11	The most fundamental variance decomposition. Used for revenue, cost of goods, and any metric that can be expressed as Price x Volume.
12
13	Formula:
14	```
15	Total Variance = Actual - Budget (or Prior)
16
17	Volume Effect = (Actual Volume - Budget Volume) x Budget Price
18	Price Effect = (Actual Price - Budget Price) x Actual Volume
19	Mix Effect = Residual (interaction term), or allocated proportionally
20
21	Verification: Volume Effect + Price Effect = Total Variance
22	(when mix is embedded in the price/volume terms)
23	```
24
25	Three-way decomposition (separating mix):
26	```
27	Volume Effect = (Actual Volume - Budget Volume) x Budget Price x Budget Mix
28	Price Effect = (Actual Price - Budget Price) x Budget Volume x Actual Mix
29	Mix Effect = Budget Price x Budget Volume x (Actual Mix - Budget Mix)
30	```
31
32	Example — Revenue variance:
33	- Budget: 10,000 units at $50 = $500,000
34	- Actual: 11,000 units at $48 = $528,000
35	- Total variance: +$28,000 favorable
36	- Volume effect: +1,000 units x $50 = +$50,000 (favorable — sold more units)
37	- Price effect: -$2 x 11,000 units = -$22,000 (unfavorable — lower ASP)
38	- Net: +$28,000
39
40	### Rate / Mix Decomposition
41
42	Used when analyzing blended rates across segments with different unit economics.
43
44	Formula:
45	```
46	Rate Effect = Sum of (Actual Volume_i x (Actual Rate_i - Budget Rate_i))
47	Mix Effect = Sum of (Budget Rate_i x (Actual Volume_i - Expected Volume_i at Budget Mix))
48	```
49
50	Example — Gross margin variance:
51	- Product A: 60% margin, Product B: 40% margin
52	- Budget mix: 50% A, 50% B → Blended margin 50%
53	- Actual mix: 40% A, 60% B → Blended margin 48%
54	- Mix effect explains 2pp of margin compression
55
56	### Headcount / Compensation Decomposition
57
58	Used for analyzing payroll and people-cost variances.
59
60	```
61	Total Comp Variance = Actual Compensation - Budget Compensation
62
63	Decompose into:
64	1. Headcount variance = (Actual HC - Budget HC) x Budget Avg Comp
65	2. Rate variance = (Actual Avg Comp - Budget Avg Comp) x Budget HC
66	3. Mix variance = Difference due to level/department mix shift
67	4. Timing variance = Hiring earlier/later than planned (partial-period effect)
68	5. Attrition impact = Savings from unplanned departures (partially offset by backfill costs)
69	```
70
71	### Spend Category Decomposition
72
73	Used for operating expense analysis when price/volume is not applicable.
74
75	```
76	Total OpEx Variance = Actual OpEx - Budget OpEx
77
78	Decompose by:
79	1. Headcount-driven costs (salaries, benefits, payroll taxes, recruiting)
80	2. Volume-driven costs (hosting, transaction fees, commissions, shipping)
81	3. Discretionary spend (travel, events, professional services, marketing programs)
82	4. Contractual/fixed costs (rent, insurance, software licenses, subscriptions)
83	5. One-time / non-recurring (severance, legal settlements, write-offs, project costs)
84	6. Timing / phasing (spend shifted between periods vs plan)
85	```
86
87	## Materiality Thresholds and Investigation Triggers
88
89	### Setting Thresholds
90
91	Materiality thresholds determine which variances require investigation and narrative explanation. Set thresholds based on:
92
93	1. Financial statement materiality: Typically 1-5% of a key benchmark (revenue, total assets, net income)
94	2. Line item size: Larger line items warrant lower percentage thresholds
95	3. Volatility: More volatile line items may need higher thresholds to avoid noise
96	4. Management attention: What level of variance would change a decision?
97
98	### Recommended Threshold Framework
99
100	\| Comparison Type \| Dollar Threshold \| Percentage Threshold \| Trigger \|
101	\|----------------\|-----------------\|---------------------\|---------\|
102	\| Actual vs Budget \| Organization-specific \| 10% \| Either exceeded \|
103	\| Actual vs Prior Period \| Organization-specific \| 15% \| Either exceeded \|
104	\| Actual vs Forecast \| Organization-specific \| 5% \| Either exceeded \|
105	\| Sequential (MoM) \| Organization-specific \| 20% \| Either exceeded \|
106
107	Set dollar thresholds based on your organization's size. Common practice: 0.5%-1% of revenue for income statement items.
108
109	### Investigation Priority
110
111	When multiple variances exceed thresholds, prioritize investigation by:
112
113	1. Largest absolute dollar variance — biggest P&L imp

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variance-analysis

2.2kinstalls2.7kforks

View on GitHub

How to install variance-analysis?

anthropics/knowledge-work-plugins/variance-analysis

$npx -y skills add anthropics/knowledge-work-plugins --skill variance-analysis

Installs into the current project.

Summary

Files · 1

View on GitHub

SKILL.md

1	# Variance Analysis
2
3	Important: This skill assists with variance analysis workflows but does not provide financial advice. All analyses should be reviewed by qualified financial professionals before use in reporting.
4
5	Techniques for decomposing variances, materiality thresholds, narrative generation, waterfall chart methodology, and budget vs actual vs forecast comparisons.
6
7	## Variance Decomposition Techniques
8
9	### Price / Volume Decomposition
10
11	The most fundamental variance decomposition. Used for revenue, cost of goods, and any metric that can be expressed as Price x Volume.
12
13	Formula:
14	```
15	Total Variance = Actual - Budget (or Prior)
16
17	Volume Effect = (Actual Volume - Budget Volume) x Budget Price
18	Price Effect = (Actual Price - Budget Price) x Actual Volume
19	Mix Effect = Residual (interaction term), or allocated proportionally
20
21	Verification: Volume Effect + Price Effect = Total Variance
22	(when mix is embedded in the price/volume terms)
23	```
24
25	Three-way decomposition (separating mix):
26	```
27	Volume Effect = (Actual Volume - Budget Volume) x Budget Price x Budget Mix
28	Price Effect = (Actual Price - Budget Price) x Budget Volume x Actual Mix
29	Mix Effect = Budget Price x Budget Volume x (Actual Mix - Budget Mix)
30	```
31
32	Example — Revenue variance:
33	- Budget: 10,000 units at $50 = $500,000
34	- Actual: 11,000 units at $48 = $528,000
35	- Total variance: +$28,000 favorable
36	- Volume effect: +1,000 units x $50 = +$50,000 (favorable — sold more units)
37	- Price effect: -$2 x 11,000 units = -$22,000 (unfavorable — lower ASP)
38	- Net: +$28,000
39
40	### Rate / Mix Decomposition
41
42	Used when analyzing blended rates across segments with different unit economics.
43
44	Formula:
45	```
46	Rate Effect = Sum of (Actual Volume_i x (Actual Rate_i - Budget Rate_i))
47	Mix Effect = Sum of (Budget Rate_i x (Actual Volume_i - Expected Volume_i at Budget Mix))
48	```
49
50	Example — Gross margin variance:
51	- Product A: 60% margin, Product B: 40% margin
52	- Budget mix: 50% A, 50% B → Blended margin 50%
53	- Actual mix: 40% A, 60% B → Blended margin 48%
54	- Mix effect explains 2pp of margin compression
55
56	### Headcount / Compensation Decomposition
57
58	Used for analyzing payroll and people-cost variances.
59
60	```
61	Total Comp Variance = Actual Compensation - Budget Compensation
62
63	Decompose into:
64	1. Headcount variance = (Actual HC - Budget HC) x Budget Avg Comp
65	2. Rate variance = (Actual Avg Comp - Budget Avg Comp) x Budget HC
66	3. Mix variance = Difference due to level/department mix shift
67	4. Timing variance = Hiring earlier/later than planned (partial-period effect)
68	5. Attrition impact = Savings from unplanned departures (partially offset by backfill costs)
69	```
70
71	### Spend Category Decomposition
72
73	Used for operating expense analysis when price/volume is not applicable.
74
75	```
76	Total OpEx Variance = Actual OpEx - Budget OpEx
77
78	Decompose by:
79	1. Headcount-driven costs (salaries, benefits, payroll taxes, recruiting)
80	2. Volume-driven costs (hosting, transaction fees, commissions, shipping)
81	3. Discretionary spend (travel, events, professional services, marketing programs)
82	4. Contractual/fixed costs (rent, insurance, software licenses, subscriptions)
83	5. One-time / non-recurring (severance, legal settlements, write-offs, project costs)
84	6. Timing / phasing (spend shifted between periods vs plan)
85	```
86
87	## Materiality Thresholds and Investigation Triggers
88
89	### Setting Thresholds
90
91	Materiality thresholds determine which variances require investigation and narrative explanation. Set thresholds based on:
92
93	1. Financial statement materiality: Typically 1-5% of a key benchmark (revenue, total assets, net income)
94	2. Line item size: Larger line items warrant lower percentage thresholds
95	3. Volatility: More volatile line items may need higher thresholds to avoid noise
96	4. Management attention: What level of variance would change a decision?
97
98	### Recommended Threshold Framework
99
100	\| Comparison Type \| Dollar Threshold \| Percentage Threshold \| Trigger \|
101	\|----------------\|-----------------\|---------------------\|---------\|
102	\| Actual vs Budget \| Organization-specific \| 10% \| Either exceeded \|
103	\| Actual vs Prior Period \| Organization-specific \| 15% \| Either exceeded \|
104	\| Actual vs Forecast \| Organization-specific \| 5% \| Either exceeded \|
105	\| Sequential (MoM) \| Organization-specific \| 20% \| Either exceeded \|
106
107	Set dollar thresholds based on your organization's size. Common practice: 0.5%-1% of revenue for income statement items.
108
109	### Investigation Priority
110
111	When multiple variances exceed thresholds, prioritize investigation by:
112
113	1. Largest absolute dollar variance — biggest P&L imp

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