Distinguish between a favorable variance and an unfavorable variance. A - A favorable variance is when actual sales / revenues exceed the budgeted revenues, or when the actual costs are less than the budgeted costs. An unfavorable variance is when there is decreasing sales / revenue or when actual costs are higher than budgeted costs. Instructors Q - Is it possible to have a favorable variance that isn't really favorable or vice versa and if so, how? Criteria If outside of our textbook, please provide your source or reference. Reference - Horngren, C. T., Datar, S.M., Foster, G., Rajan, M., & Ittner, C. (2009). Cost Accounting: A Managerial Emphasis (13th ed.). Upper Saddle River, NJ: Pearson Prentice Hall, p. 227