Answer
A favorable variance, denoted as F, indicates that actual results are better than the budgeted amount. In terms of revenue, it means actual revenues exceed budgeted revenues. For costs, F implies actual costs are less than budgeted costs. On the other hand, an unfavorable variance, denoted as U, signifies that actual results are worse than the budgeted amount, leading to a decrease in operating income. In some regions, unfavorable variances are referred to as adverse variances.
Work Step by Step
A favorable variance, denoted as F, indicates that actual results are better than the budgeted amount. In terms of revenue, it means actual revenues exceed budgeted revenues. For costs, F implies actual costs are less than budgeted costs. On the other hand, an unfavorable variance, denoted as U, signifies that actual results are worse than the budgeted amount, leading to a decrease in operating income. In some regions, unfavorable variances are referred to as adverse variances.
