In a variance analysis, what does a favorable variance indicate?

Practice Questions

1 question

Costs are higher than budgeted
Revenues are lower than budgeted
Costs are lower than budgeted or revenues are higher than budgeted
No impact on financial performance

Questions & Step-by-step Solutions

1 item

Q: In a variance analysis, what does a favorable variance indicate?

Solution: A favorable variance indicates that costs are lower than budgeted or revenues are higher than budgeted, improving financial performance.

Steps: 4

Step 1: Understand what variance analysis is. It is a method used to compare actual financial performance to budgeted performance.
Step 2: Identify what a favorable variance means. It means that the actual results are better than what was planned.
Step 3: Recognize that a favorable variance can happen in two ways: either costs are lower than expected or revenues are higher than expected.
Step 4: Conclude that a favorable variance improves financial performance, meaning the organization is doing better than it had planned.

In a variance analysis, what does a favorable variance indicate?

Practice Questions

Questions & Step-by-step Solutions

Related Questions

On a scale of 0–10, how likely are you to recommend The Soulshift Academy?