ECONOMICS

Detailed explanation-1: -If standard costs exceed actual costs, a credit entry would be made in the appropriate variance account to record the variance. If a favorable variance is recorded in the accounting records, it will be recorded as a credit.

Detailed explanation-2: -If actual costs are greater than standard costs the variance is unfavorable. An unfavorable variance tells management that if everything else stays constant the company’s actual profit will be less than planned.

Detailed explanation-3: -The difference between actual cost and standard cost is called variance. A variance is unfavorable if actual cost is higher than standard cost. If actual cost is lower, the variance is favorable.

Detailed explanation-4: -A standard cost variance is the difference between a standard cost and an actual cost. This variance is used to monitor the costs incurred by a business, with management taking action when a material negative variance is incurred. The standard from which the variance is calculated may be derived in several ways.