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Variance in budget

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What is the purpose of identifying variances in budgets? Does having a favorable variance always mean a positive situation? How about negative? Can you share two examples where a favorable variance could have a negative underlying affect.

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This solution explains why it is necessary to identify variances in budgets, and outlines why positive variances are not always good and negative variances are not always bad; it provides two examples to illustrate these points.

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What is the purpose of identifying variances in budgets? Does having a favorable variance always mean a positive situation? How about negative? Can you share two examples where a favorable variance could have a negative underlying affect?
The purposes of variance analysis are:
1. Variance analysis is the element of management by exception. i.e., the management has to concentrate on those parts which are not working as per the ...

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