ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A favorable sales price variance means a company received a higher-than-expected selling price, often due to fewer competitors, aggressive sales and marketing campaigns, or improved product differentiation.

Detailed explanation-2: -Variances are the difference between estimated and actual results. So in the given case, the variable cost may vary as per the sales level but the fixed cost variance would not be associated with the sales revenue variance. Thus it is not possible that variances are due to higher-than-expected sales volume.

Detailed explanation-3: -A variance should be indicated appropriately as “favorable” or “unfavorable.” A favorable variance is one where revenue comes in higher than budgeted, or when expenses are lower than predicted. The result could be greater income than originally forecast.

Detailed explanation-4: -A favourable variance is where actual income is more than budget, or actual expenditure is less than budget. This is the same as a surplus where expenditure is less than the available income.

Detailed explanation-5: -The answer is: c) An unexpected increase in demand caused the direct labor workforce to work overtime. Since overtime hours are more expensive than regular hours, the actual labor rate would increase.