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3 November, 09:44

Which of the following is true? A. Unfavorable variances should always be interpreted as "bad news" for the company. B. Favorable variances should always be interpreted as "good news" for the company. C. Management by exception means that managers investigate all unfavorable variances but not all favorable variances. D. Favorable variances are variances that cause operating income to be higher than budgeted.

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  1. 3 November, 13:06
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    Answer: Option D

    Explanation: In simple words, favorable variance can be any of the two situation either when the actual cost of a project is less than its budgeted cost at the same level of activity or when the actual revenue is more than the budgeted revenue at the same level of activity.

    In both the cases, the producer will be benefited as there will be a profit to the project leading to increase in operating income. Hence the correct option is D.
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Home » Business » Which of the following is true? A. Unfavorable variances should always be interpreted as "bad news" for the company. B. Favorable variances should always be interpreted as "good news" for the company. C.
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