A favourable variance
A)is an indication that the company is not operating in an optimal manner.
B)implies a positive result if quality control standards are met.
C)implies a positive result if standards are flexible.
D)means that standards are too loosely specified.

Question

Quizplus · Accepted Answer

A favourable variance means that actual results are better than expected or budgeted results. This implies a positive result if quality control standards are met, as the desired outcome has been achieved with lower costs or higher revenues. It does not necessarily indicate that the company is not operating optimally or that standards are too loosely specified. However, if standards are inflexible, the company may not be able to take advantage of favourable variances.

A Favourable Variance