Wrinkles

What is an unfavorable budget variance?

In finance, unfavorable variance refers to a difference between an actual experience and a budgeted experience in any financial category where the actual outcome is less favorable than the projected outcome.

What does unfavorable to budget mean?

Unfavorable budget variances refer to the negative difference between actual revenues and what was budgeted. This usually happens when revenue is lower than expected or when expenses are higher than expected.

How do you know if a budget variance is favorable or unfavorable?

A variance is usually considered favorable if it improves net income and unfavorable if it decreases income. Therefore, when actual revenues exceed budgeted amounts, the resulting variance is favorable. When actual revenues fall short of budgeted amounts, the variance is unfavorable.

What does budget variance mean?

A budget variance is the difference between the amount you budgeted for and the actual amount spent. When preparing energy budgets, it is practically impossible to be “right on the money;” therefore resulting in a budget surplus or deficit.

Are unfavorable variances always good?

We express variances in terms of FAVORABLE or UNFAVORABLE and negative is not always bad or unfavorable and positive is not always good or favorable. Keep these in mind: When actual materials are more than standard (or budgeted), we have an UNFAVORABLE variance.

What is favorable and unfavorable variance?

A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, indicating losses or shortfalls. Budget variances occur because forecasters are unable to predict future costs and revenue with complete accuracy.

What is a favorable variance and what is an unfavorable variance?

In the field of accounting, variance simply refers to the difference between budgeted and actual figures. Higher revenues and lower expenses are referred to as favorable variances. Lower revenues and higher expenses are referred to as unfavorable variances.

What is unfavorable variance?

Unfavorable variance is an accounting term that describes instances where actual costs are greater than the standard or projected costs. An unfavorable variance can alert management that the company's profit will be less than expected.