Which of the following statements is true?
A) A favourable variance always benefits a company.
B) Managers attempt to maintain unfavourable variances.
C) Favourable variances are typically not preferred by management.
D) Only a flexible budget can be used to determine a variance.
E) A favourable variance is not always beneficial for an organization.

Question

Quizplus · Accepted Answer

A favourable variance may indicate that the actual performance exceeded the expected or budgeted performance, but it may also mean that resources were not used efficiently or that the budget was set too low. Thus, a favourable variance may not always be beneficial for an organization. Managers typically aim to achieve favourable variances, but they also need to analyze the reasons behind them to improve future performance. Moreover, both flexible and static budgets can be used to determine variances.

Which of the Following Statements Is True