Which of the following best describes a variance analysis?

Variance analysis is primarily concerned with assessing the differences between actual financial performance and what was budgeted or expected. This process allows organizations to understand why variances occur, whether they be favorable or unfavorable, and helps in identifying areas that require attention or adjustment.

For instance, if a company budgeted $100,000 in sales but generated $120,000, the variance analysis will highlight this $20,000 favorable variance. By breaking down the reasons behind such variances, management can make informed decisions moving forward, whether that's adjusting future budgets, reallocating resources, or enhancing operational efficiency.

This method is crucial for financial planning and control, as it not only aids in measuring performance but also drives strategic planning and operational improvements. Understanding the specifics of what caused variances—be it higher sales volumes, changes in market conditions, or cost overruns—can lead to more effective decision-making and resource management.

In contrast, the other options lack the core focus of variance analysis. Customer feedback analysis pertains to understanding customer satisfaction and preferences but does not relate to financial performance metrics. Assessing market trends involves examining broader market dynamics over time rather than financial adherence to budgets. Forecasting sales growth is about predicting future revenues based on various factors, rather than analyzing past performance