A favorable variance is a variance that
A)increases costs relative to the budgeted amount.
B)decreases cash relative to the budgeted amount.
C)increases operating income relative to the budgeted amount.
D)decreases operating income relative to the budgeted amount.

Question

Quizplus · Accepted Answer

A favorable variance is a difference between actual results and budgeted or planned results that increases operating income or profit. Option A is incorrect because a favorable variance would not increase costs relative to the budgeted amount. Option B is incorrect because a favorable variance would not decrease cash relative to the budgeted amount. Option D is incorrect because a favorable variance would not decrease operating income relative to the budgeted amount.

A Favorable Variance Is a Variance That