Large favourable variances between actual and planned performance may indicate:
A) that the firm must be operating efficiently.
B) that actual expenses were higher than budgeted expenses.
C) budget income targets may need to be revised upwards in the future.
D) that actual income was too high and should be revised downwards in the future.

Question

Quizplus · Accepted Answer

Large favourable variances between actual and planned performance indicate that the company has performed better than expected. This could mean that budget income targets may need to be revised upwards in the future to reflect the current level of performance. It does not necessarily indicate whether the firm is operating efficiently or whether actual expenses were higher or lower than budgeted expenses. Therefore, option A and B are incorrect. Option D is also not applicable since a favourable variance in income should not be revised downwards in the future.

Large Favourable Variances Between Actual and Planned Performance May Indicate