What is the difference between favorable variance and unfavorable variance?
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A favorable variance occurs when the cost to produce something is less than the budgeted cost. It means a business is making more profit than originally anticipated. Favorable variances could be the result of increased efficiencies in manufacturing, cheaper material costs, or increased sales. Show
Here’s What We’ll Cover What Does a Favorable Variance Indicate? What Is Unfavorable Variance? Should Variances Be Positive or Negative? What Is Controllable and Uncontrollable Variance? How Do You Calculate a Budget Variance? NOTE: FreshBooks Support team members are not certified income tax or accounting professionals and cannot provide advice in these areas, outside of supporting questions about FreshBooks. If you need income tax advice please contact an accountant in your area. Unfavorable variance The most common work plan variances (work, cost, start, and finish) measure the difference between the current estimate and the original baseline estimate. If tasks are being completed late or in excess of their original work estimates, the project manager should look for trouble signs regularly to be sure that the plan is revised to adjust to the day-to-day realities of the project. If progress is not as expected, the project manager has to figure out how to revise the plan to extend the scheduled finish date, adjust resource assignments, or reduce scope. The values in the current work, cost, start, finish, and duration fields are usually modified through the tracking process. As team members report unexpected changes in the plan, the current values will diverge from the original baseline values, causing variances. Our next post summarizes these different types of variances. What is meant by favorable or unfavorable variance?A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, indicating losses or shortfalls. Budget variances occur because forecasters are unable to predict future costs and revenue with complete accuracy.
What is favorable and unfavorable?“Favorable attitude” is defined as a person's positive assessment of a behavior or related construct (such as a specific product or source of service). “Unfavorable attitude” is defined as a person's negative assessment of a behavior or related construct.
What is unfavorable variance?Unfavorable variance is an accounting term that describes instances where actual costs are higher than the standard or projected costs. An unfavorable variance can alert management that the company's profit will be less than expected.
What causes favorable and unfavorable variances?Favorable variances are defined as either generating more revenue than expected or incurring fewer costs than expected. Unfavorable variances are the opposite. Less revenue is generated or more costs incurred. Either may be good or bad, as these variances are based on a budgeted amount.
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