## The method of absolute differences and other methods of economic analysis

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

## A similar valuation option is based on the calculationintermediate data of the studied indicator. It passes by replacing planned data with actual ones, only one of the factors changes, the others are eliminated (the principle of elimination). Formula for calculation:

Apl = apl* bpl*atpl

Aa = af* bpl*atpl

Ab = apl* bf*atpl

Af = af* bf*atf

Here, the figures for the plan are actual data.

## Economic analysis. Method of absolute differences

The considered type of valuation is based on the previousoption. The only difference is that it is necessary to find the product of the deviation of the investigated factor (D) by the planned or actual value of the other. More clearly demonstrates the method of absolute differences of the formula: Apl = apl* bpl* atpl

Aa" = a "* bpl* atpl

Ab " = 6 "* af* atpl

Aat" = s "* af* bf

Af " = af* bf* atf

Aa" = Aa" * Ab "* Aat"

## Method of absolute differences. Example

The following information about the company 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 square meters. m.

It is necessary to determine how various factors (the change in the size of the area and the amount of output per square meter) affected the volume of the created goods.

1) Determine the output of products per 1 sq. Km. m:

1.476: 41 = 0.036 million rubles. Is the planned value.

1.428 / 42 = 0.034 million rubles. Is the actual value.

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

 Indicators Planned indicator Actual rate The Abandonment plus or minus Volume of goods produced (million rubles) 1.476 1.428 - Area for the production of goods 41 42 + The value of the output is 1 square. m, million rubles. 0.036 0.034 -

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

ya" = (42 - 41) * 0.036 = 0.036 million rubles.

yb " = 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 due to the increase in the areafor production of 1 square meter. m the volume of manufactured goods increased by 0.036 million rubles. However, due to a decrease in output per 1 sq. Km. m this value decreased by 0.084 million rubles. In general, the volume of manufactured goods in the reporting year decreased by 0.048 million rubles.

That's the principle of the absolute difference method.

## This option is applicable ifthe initial indicators have relative deviations of factor values, that is, in a percentage. Formula for calculating the change in each indicator:

and x "= (af - apl)/apl * 100 %

b% "= (bf - bpl) / bpl * 100 %

in% "= (inf - atpl)/atpl * 100 %

The integral method of investigating factors relies on special laws (logarithmic). The result of the calculation is determined with the help of a PC.