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In variance analysis, what does a negative variance indicate?

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Question: In variance analysis, what does a negative variance indicate?

Options:

  1. Better performance than expected
  2. Worse performance than expected
  3. No variance
  4. Increased sales

Correct Answer: Worse performance than expected

Solution: 

A negative variance indicates worse performance than expected, meaning actual results fell short of budgeted expectations.

In variance analysis, what does a negative variance indicate?

Practice Questions

Q1
In variance analysis, what does a negative variance indicate?
  1. Better performance than expected
  2. Worse performance than expected
  3. No variance
  4. Increased sales

Questions & Step-by-Step Solutions

In variance analysis, what does a negative variance indicate?
  • Step 1: Understand what variance analysis is. It compares actual results to expected (budgeted) results.
  • Step 2: Know what a negative variance means. It shows that actual results are less than what was expected.
  • Step 3: Realize the implication of a negative variance. It indicates worse performance than planned.
  • Step 4: Conclude that a negative variance means the results did not meet the budgeted expectations.
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