False. If budgeted sales are greater than actual sales, it results in an Unfavorable variance, not a Favorable variance.
A budgeted sales figure is an estimate of the expected sales for a specific period, such as a month or a year. Actual sales, on the other hand, are the real sales that occurred during that period.
When budgeted sales are greater than actual sales, it means that the company's actual performance fell short of its expectations. This could be due to various factors such as lower demand, increased competition, or ineffective marketing strategies. In this case, the difference between budgeted sales and actual sales is referred to as an unfavorable variance.
For example, let's say a company budgets sales of $100,000 for a month but only achieves actual sales of $80,000. The difference between the budgeted sales ($100,000) and actual sales ($80,000) would be $20,000, representing an unfavorable variance.
On the other hand, if actual sales exceed budgeted sales, it would result in a favorable variance. This indicates that the company performed better than expected, potentially due to higher demand, effective marketing campaigns, or other positive factors.
It is important for companies to analyze these variances to understand the reasons behind them and take appropriate actions to improve performance in the future.