A favorable variance indicates which of the following outcomes?

Question

Quizplus · Accepted Answer

A favorable variance means that actual results are better than budgeted results, which typically leads to an increase in operating income relative to the budgeted amount. Option A is incorrect because a favorable variance would decrease the static budget variance (the difference between actual results and the original budget). Option B is incorrect because a favorable variance would increase operating income, not decrease it. Option D is incorrect because a favorable variance does not necessarily have any impact on output. Option E is incorrect because a favorable variance might not necessarily impact individual variable costs.

A Favorable Variance Indicates Which of the Following Outcomes