What is the difference between operational and planning variances?

Variance is the difference between budgetd and actual result.

If the difference is due to an event that is uncontrollable by the budget holder, it is a planning variance.

If the difference is due to an event that is controllable by the budget holder, it is an operational variance.

For example,

Budgeted sales = $ 1000

10% fall in sales was experienced by the industry due to recession.

Actual sales = $ 700

Overall variance is 1000 - 700 = $ 300 adverse

However, 10% fall in budgeted sales caused by recession was uncontrollable by sales manager.. Planning variance would be $100 (1000 * 10%).

Remainder amount of variance, i.e $ 200 (300 overall - 100 planning) is operational variance caused by decisions taken by sales manager.

In other words,

Planning variance refers to planning gap. And

Operational variance refers to performance gap.

The gap may be favourable or adverse.

More precisely,

Overall variance = Original Budget - Actual Result

Broken down into;

Planning variance = Original Budget - Revised Budget

Operational variance = Revised Budget - Actual Result

Operational Variances = Actual vs Revised Budget or Forecast

Planning Variances = Original Budget vs Revised Budget