Variance Decomposition (Price vs. Quantity)

Definition

Splitting a variance into how much came from volume differences (quantity) vs. rate differences (price) — locating the CAUSE, not just the size.

Formula

Quantity variance = (Actual qty - Est. qty) x Est. price
Price variance = (Actual price - Est. price) x Actual qty

Worked Example

Backend line: estimated 80 h @ $60, actual 102 h @ $60.

Quantity variance = (102 - 80) x $60 = +$1,320  <- took longer
Price variance    = ($60 - $60) x 102 =     $0  <- rate as planned

Conclusion: the overrun is effort under-estimation, not rates.
Fix the estimation process, not the salaries.

Interpretation & Pitfalls

The decomposition turns 'we're over budget' into a specific, actionable diagnosis.

In TupicFinance

Because estimates and actuals store hours and rates separately, the decomposition is a query.