Explain why a “favorable” variance might actually be bad for the company.
Discussion Question 1: Explain why a “favorable” variance might actually be bad for the company.
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Favorable Variance
Favorable variance entails actual and budgeted costs differences according to DRURY and COLIN. Favorable variance may impose more risks which might affect organization operations. Actual costs tends to be lesser compared to budgeted revenue which creates risks and funds violation grounds. Yet again favorable variance expresses whether organization has created much revenue and less revenue than expected which opens door for violation of figures to meet defaulters’ needs. Demanding business changes, unexpected plans and errors are more inclined to stem from organization favorable variance.
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