When does a favorable revenue variance exist?

• A. When actual revenues are lower than budgeted revenues
• B. When actual revenues equal budgeted revenues
• C. When actual revenues are higher than budgeted revenues
• D. When budgeted revenues increase

Answer: (C)

A favorable revenue variance happens when actual revenues exceed what was budgeted. This means the company earned more in real terms than it planned to, so the difference (actual minus budget) is positive. For example, if the budgeted revenue is 100,000 and the actual revenue is 110,000, the variance is +10,000, which is favorable. If actual revenue matches budget, the variance is zero; if actual is less than budget, the variance is negative and considered unfavorable. The concept hinges on comparing actual results to the budget, not on changing the budget itself.