Question

Could you help and explain with the favorable and unfavorable? Exercise 15-5A (Algo) Determining amount and type (favorable vs. unfavorable) of variance LO 15-3 Required Compute variances for the following items and indicate whether each variance is favorable (F) or unfavorable (U).

Answer 1

In variance analysis, favorable and unfavorable variances refer to variances that are better or worse than expected, respectively. You compare the actual result to the expected result to determine if a variance is favorable or unfavorable.

Step-by-step explanation:

In the context of variance analysis, the terms 'favorable' and 'unfavorable' refer to the direction of the variance compared to the expected or budgeted value. A favorable variance occurs when the actual result is better than the expected result, while an unfavorable variance occurs when the actual result is worse than expected.

To determine whether a variance is favorable or unfavorable, you need to compare the actual result to the expected result. If the actual result is greater than the expected result (in the case of a positive variance) or less than the expected result (in the case of a negative variance), the variance is considered favorable. If the actual result is less than the expected result (positive variance) or greater than the expected result (negative variance), the variance is considered unfavorable.

For example, in Exercise 15-5A, if the actual variance for an item is lower than the expected variance, it would be considered a favorable variance (F). On the other hand, if the actual variance is higher than the expected variance, it would be considered an unfavorable variance (U).