ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -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-2: -Favorable Revenue Variance If a company had budgeted its revenues to be $200, 000 and the actual revenues end up being $208, 000, the company will have a favorable variance of $8, 000. The variance is favorable because having the actual revenues being more than the amount budgeted is good for the company’s profits.

Detailed explanation-3: -When revenue is higher than the budget or the actual expenses are less than the budget, this is considered a favorable variance. Unfavorable variances refer to instances when costs are higher than your budget estimated they would be.

Detailed explanation-4: -What is a Favorable Variance? A favorable variance indicates that a business has either generated more revenue than expected or incurred fewer expenses than expected. For an expense, this is the excess of a standard or budgeted amount over the actual amount incurred.