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 results in a better outcome than what was budgeted. In terms of operating income, a favorable variance means that actual income is higher than budgeted income, which is a positive situation. Therefore, choice C, "increases operating income relative to the budgeted amount," is the correct answer.

A Favorable Variance Is a Variance That