Distinguish between favorable and unfavorable cost (and revenue) variances.

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Part 1

A.

Favorable variances arise when actual costs are less than budgeted costs (or actual revenue exceeds budgeted revenue). Unfavorable variances mean that actual costs are greater than budgeted costs (or actual revenue falls short of budgeted revenue).

B.

Favorable variances arise when the static budget falls short of the flexible budget. Unfavorable variances arise when the static budget exceeds the flexible budget.

C.

Favorable variances arise when effectiveness exceeds efficiency. Unfavorable variances arise when efficiency exceeds effectiveness.

D.

Favorable variances arise when budgeted costs are less than actual costs (or budgeted revenue exceeds actual revenue). Unfavorable variances mean that budgeted costs are greater than actual costs (or budgeted revenue falls short of actual revenue).