These entries showed how to perform a variance analysis given two, three, or four components of variance:

• Variance Analysis - Two Components
• Variance Analysis - Three Components
• Variance Analysis - Four Components

The logic illustrated in these posts can be applied to annual and monthly forecasting models. The example below illustrates how one could build a monthly salary forecasting model given a salary, FTE, and paid day history and projection. The example assumes that the salaries and FTEs for the period spanning January 2007 through April 2007 are given. The task is to project salaries on a per-month basis given a 4% salary increase that occurs in October 2007, a 5% salary increase that occurs in August 2008, an increase of 1 paid day between 2007 and 2008, and an increase of 11 FTEs that occur between 2007 and 2008.

The cells shaded yellow provide inputs to the template. Of note is the trend in salary rate which is shown in the chart below. The white bars show the actual rate and the blue bars show the projected rate. The salary rate, given the FTE, paid day, and average salary calculations, proves to be a step-function as it moves from $1.10 to $1.15 to $1.20 based on when the salary increases occur.

In addition to salaries, models that forecast and spread revenue, discounts, benefits, supplies, services, and more can be created based on the logic in this template.