Favorable variance is the variance causes operating income to be greater than the budgeted operating income.
A favorable variance is wherein real income is greater than budget, or real expenditure is less than budget. That is similar to a surplus in which expenditure is much less than the available earnings.
Is Favorable variance usually accurate?
Favorable variances are defined as either generating greater revenue than expected or incurring fewer fees than expected. Damaging variances are the other. Much less revenue is generated or greater prices incurred. Either may be correct or terrible, as these variances are based on a budgeted amount.
How do you inform if a variance is favorable variance or destructive?
If sales have been better than expected, or expenses were decrease, the variance is favorable variance. If sales have been decrease than budgeted or costs were better, the variance is detrimental.
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