Favourable variances are always positive amounts; unfavourable variances are always negative amounts.

Question

Quizplus · Accepted Answer

Favourable variances indicate better-than-expected performance and are typically shown as positive amounts in financial reporting, but the concept of positive or negative is relative to the context (e.g., cost savings are positive, but reduced revenue is negative). Unfavourable variances show worse-than-expected performance and can be represented as negative amounts when costs exceed budgets, but again, the positive or negative nature depends on the context (e.g., higher revenue than expected could be shown as a positive variance). The key is whether the variance is better or worse than expected, not strictly the sign of the number.

Favourable Variances Are Always Positive Amounts; Unfavourable Variances Are Always