How do you calculate and interpret the profit variance?

Profit variance is calculated by subtracting the actual profit from the budgeted or expected profit. This can be expressed as: Profit Variance = Actual Profit - Budgeted Profit. A positive variance indicates that the actual profit exceeded expectations, suggesting better performance, while a negative variance indicates underperformance. Analyzing these variances helps identify areas for improvement and informs future budgeting and operational decisions.