Which statement about Variance calculation is correct?

• A. Variance is the product of actual and theoretical usage.
• B. Variance is the ratio of actual to theoretical usage.
• C. Variance is calculated as Theoretical Usage minus Actual Usage.
• D. Variance equals Actual Usage minus Theoretical Usage.

Answer: (D)

Variance measures how much actual usage differs from what was planned. It is calculated as Actual Usage minus Theoretical Usage. This directly shows the deviation and its direction: a positive variance means you used more than planned, while a negative variance means you used less than planned. The other statements aren’t correct because variance isn’t a product or a ratio, and subtracting Theoretical from Actual would flip the sign of the result. For example, if actual usage is 105 units and theoretical usage is 100 units, the variance is 5 units (over plan); if actual is 95, the variance is -5 (under plan).