Should both favorable and unfavorable variances be investigated, or only the unfavorable ones? Explain.
Both favorable and unfavorable variances should be investigated. Let's briefly look at what each one is, to determine if they should be investigated.
A favorable variance is a variance that, when compared to the company's budget, the actual amount of the revenue or expense makes the company's income higher than what was expected. Revenue was greater or expenses were lower, and it created a situation where the company's net income was higher than expected, leading to a profitable ...
The solution thoroughly discusses if only unfavorable variances should be investigated, or if favorable variances should also be investigated.