ECONOMICS

Detailed explanation-1: -Conversely, an unfavorable variance occurs when revenue falls short of the budgeted amount or expenses are higher than predicted. As a result of the variance, net income may be below what management originally expected.

Detailed explanation-2: -Unfavorable variance is an accounting term that describes instances where actual costs are greater than the standard or projected costs. An unfavorable variance can alert management that the company’s profit will be less than expected.

Detailed explanation-3: -What does favorable and unfavorable mean in accounting? In the field of accounting, variance simply refers to the difference between budgeted and actual figures. Higher revenues and lower expenses are referred to as favorable variances. Lower revenues and higher expenses are referred to as unfavorable variances.

Detailed explanation-4: -Answer and Explanation: The correct answer is option (a). If budgeted revenue exceeded actual revenue then, an unfavorable variance appearing in a performance report. Explanation: If budget revenue is more than the actual revenue then the variance would be reported as an unfavorable variance.

Detailed explanation-5: -Favorable variances are defined as either generating more revenue than expected or incurring fewer costs than expected. Unfavorable variances are the opposite. Less revenue is generated or more costs incurred. Either may be good or bad, as these variances are based on a budgeted amount.