Question

A favorable variance Select one: a. is an indication that the company is not operating in an optimal manner. b. implies a positive result if quality control standards are met. c. implies a positive result if standards are flexible. d. means that standards are too loosely specified.

Answer 1

B

Explanation:

Favorable variance:

A difference between the actual cost and or a standard cost and the actual cost is lesser in amount. In the case of revenues, a favorable variance occurs when the actual revenues greater than the standard cost revenues. Obtaining a favorable variance doesn't mean much since it is based on budgeted or a standard amount that may not be an indicator or a good performance. In particular, the favorable variance is related to the price are get on the difference between actual and paid variances. The reporting of the favorable variance is the key component of the command and control system where budget is standard amount that may not be the indicator of good performances.