ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, indicating losses or shortfalls.

Detailed explanation-2: -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.

Detailed explanation-3: -A positive variance means that actuals and encumbrances are less than the amount budgeted (good). A negative variance means the account is over spent (bad).

Detailed explanation-4: -Hence from the above conclusions we can say that favourable variances are good and unfavourable variance are bad from the point of view of company.