Use a step-by-step approach to identify variances in costs. The following questions should direct your thinking:
Is the price paid for items more or less than budgeted? If more, what are the financial consequences? What can you do to eliminate the variance?
Are the amounts purchased more or less than budgeted? Where this is the case, you need to consider the cause. Are operations down? This could explain a reduction in expense for items critical to work. Likewise, an increase in activities could mean an increase in items purchased.
Is there an expenditure timing difference? That is, did you budget to purchase next month but needed to expend this month? Is this likely to happen again? How will this impact the year as a whole?