Budget Variance Analysis for Engineering: 5 Reasons Plan Misses Reality
You open the Q3 Plan-vs-Actual report. Planned engineering spend: $1.8M. Actual: $2.34M. Variance: +30%. The CFO wants to know why by Friday.
The textbook answer says "investigate any line where |actual − plan| > 10%". That's where most engineering variance reviews stop, and where they go wrong. A 30% gap on engineering cost has at least 5 distinct causes. Each one leaves a different signature in the data. If you don't decompose the variance, you end up firing the project manager when the real culprit was a retroactive raise round in August.
CIMA's variance analysis framework treats variance as a tree: rate variance × volume variance × mix variance. Engineering cost is messier, because labor isn't a uniform commodity. Below is the version that actually fits how dev teams burn money.