The Innovation and Learning Perspective of the Balanced Scorecard Research Paper

The Innovation and Learning Perspective of the Balanced Scorecard - Research Paper Example There are two main causes of variances in a business’s budget. One of the main causes is spending more than the budget allows. This could be due to the fact that the management budgeted for less than required; there was mismanagement of funds or general poor planning. Secondly, there may be an unexpected emergency in a business that may cause a major rift in the use of funds from the budget (Berry et. al. 2006). Mechanical damages to a major processing asset, for instance, could lead to an urgent purchase of another one in order to maintain the expected level of production. As an example, the Manchester Meerkat Company (MMC) suffered a blow when floods drained the fibre filling. This caused emergency spending that may have resulted in variance in the budget. This would cause destabilization in the budget hence a variance. These variances can either cause adverse effects to an organization if ignored or lead to success in business if noted and improved. This is because there ex ist two categories of variances namely favourable and unfavourable variances. The favourable variances occur where the results of business operations are better as compared to the expected results. On the other hand, the unfavourable variances occur whenever the end results of business operations are worse than expected results. Therefore, managers always carry out variance analysis in order to the look-after-the fact at what caused the difference. Furthermore, according to Blocher & Cokins (2005), this analysis helps the management to pinpoint the effects the variances have to the business and how to correct or improve on them.