If both favorable and unfavorable variances exist,the variances are subtracted from each other.The variance is determined to be favorable or unfavorable based on which one is the larger amount.

Question

Quizplus · Accepted Answer

When both favorable and unfavorable variances exist, they are not simply subtracted from each other. Instead, they are analyzed separately to determine the nature and causes of each variance. Only after this analysis is complete can the net effect of the variances be determined. Therefore, the statement in the question is false.

If Both Favorable and Unfavorable Variances Exist,the Variances Are Subtracted