ECONOMICS

Detailed explanation-1: -An adverse variance is where actual income is less than budget, or actual expenditure is more than budget. This is the same as a deficit where expenditure exceeds the available income. A favourable variance is where actual income is more than budget, or actual expenditure is less than budget.

Detailed explanation-2: -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-3: -If there’s zero variance, it means actual sales came in according to plan. This is good in the sense that the forecast is accurate, but it’s only favorable if the company has a positive sales quantity variance and it’s only unfavorable if the company has a negative sales quantity variance.

Detailed explanation-4: -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-5: -A positive variance means that actual revenues exceed the projected budget (good). A negative variance shows the amount of projected revenue that is unrealized (bad if nearing the end of the budget cycle and actual revenues fall short of projections).