At the start of fiscal period every organisation prepares budgets for the coming period and then use the same estimated budget at the end of fiscal year to evaluate the performence in the fiscal year.
When actuall amount for any activity is utilized less then the budgeted amount estimated for the same activity at the start of the fiscal year and perform the same activity accurately as estimated at start of period with less amount then it is called favourable variance and vice versa.
Chat with our AI personalities
Favourable variance is that variance which is good for business while unfavourable variance is bad for business
A budget "variance" is the difference between planned and actual performance.
The SD is the (positive) square root of the variance.
Labor cost variance means the difference between standard labor cost and actual labor cost.
Fixed overhead budgeted variance is the difference between estimated budgeted cost and actual fixed overhead cost of production.