The method of absolute differences and other methods of economic analysis

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:44

In any enterprise, all running processes are interconnected. That is why economic analysis examines the degree of influence of various factors on the value of economic indicators. Various analytical methods of evaluation will help determine the degree of their impact: chain substitutions, the method of absolute differences, and others. In this publication, we will take a closer look at the second method.

Economic analysis. Chain substitution method

This assessment option is based on the calculation of intermediate data of the studied indicator. It passes by replacing planned data with actual ones, while only one of the factors changes, the rest are excluded (the principle of elimination). Formula for calculation:

A_pl=a_plb_plc _pl

A_a=a_fb_plc _pl

A_b=a_fb_fc _pl

A_f=a_fb_fc _f

Here, the indicators according to the plan are the actual data.

Economic analysis. Absolute difference method

The considered type of evaluation is based on the previous version. The only difference is that you need to find the product of the deviation of the studied factor (D) by the planned or actual value of another. More clearly demonstrates the method of absolute differences formula:

A_pl=a_pl b_pl c _pl

A_a'=a'b_pl c_pl

A_b'=b'a_f c_pl

A_c'=c'a_f b_f

A_f'=a_f b_f c _f

A_a'=A_a'A_b' A in'

Method of absolute differences. Example

The following company information is available:

• the planned volume of goods produced is 1.476 million rubles, in fact - 1.428 million rubles;
• the area for production according to the plan was 41 square meters. m, in fact - 42 sq. m.

It is necessary to determine how various factors (change in the size of the area and the amount of output per 1 sq. m) influenced the volume of goods created.

1) Determine the output per 1 square. m:

1, 476: 41=0.036 million rubles – planned value.

1, 428/42=0.034 million rubles – actual value.

2) To solve the problem, we enter the data into the table.

Indicators	Target	Actual	Rejection plus or minus
Volume of produced goods (million rubles)	1, 476	1, 428	-
Area for the production of goods	41	42	+
The value of output per 1 square. m, mln RUB	0, 036	0, 034	-

Let's find the change in the volume of goods produced from area and output, using the method of absolute differences. We get:

y_{a'=(42 – 41)0.036=0.036 million rubles}

y_{b'=42(0.034 - 0.036)=- 0.084 million rubles}

The total change in the volume of production is 0.036 - 0.084=-0.048 million rubles.

It follows that by increasing the area for production by 1 sq. m volume of manufactured goods increased by 0.036 million rubles. However, due to a decrease in production per 1 sq. m, this value decreased by 0.084 million rubles. In general, the volume of goods produced at the enterprise in the reporting year decreased by 0.048 million rubles.

This is how the absolute difference method works.

Method of relative differences and integral

This option is used if there are relative deviations in the initial indicatorsfactorial values, that is, as a percentage. Formula for calculating the change in each indicator:

a %'=(a_f – a_pl)/a_pl100%

b %'=(b_f – b_pl)/b_pl100%

in %'=(in_f – in_pl)/in_pl100%

The integral method of studying factors is based on special laws (logarithmic). The calculation result is determined using a PC.