A favorable variance is a variance that
A)Increases cash 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 means that the actual results are better than the budgeted results. In this case, a favorable variance would mean that the operating income is higher than what was budgeted, which is option C. Options A and B relate to cash, which may or may not be related to the operating income variance. Option D is incorrect as a favorable variance would not decrease operating income relative to the budgeted amount.

A Favorable Variance Is a Variance That