Favorable variances are good for the organization, while unfavorable variances are bad for the organization.

Question

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Favorable variances indicate that actual performance is better than expected, which can be positive. However, they can also signal overestimation of costs or underestimation of sales, potentially hiding inefficiencies. Unfavorable variances show worse-than-expected performance, highlighting areas for improvement, but they're not inherently bad as they can drive strategic adjustments and operational improvements.

Favorable Variances Are Good for the Organization, While Unfavorable Variances