A favorable variance means that actual costs are less than standard costs.

A favorable variance means that actual costs are less than standard costs.

• A. False
• B. Cannot be determined
• C. True
• D. Not necessarily

Answer: (C)

In variance analysis, you compare what was actually spent to what was expected (the standard cost). For cost variances, spending less than the standard is a favorable outcome because it means you used fewer resources or paid less than planned, reducing the actual cost against the standard. For example, if the standard cost to produce a unit is 100 and the actual cost is 92, the variance reflects cost savings, which is considered favorable. So the statement that a favorable variance means actual costs are less than standard costs is true.

In variance analysis, you compare what was actually spent to what was expected (the standard cost). For cost variances, spending less than the standard is a favorable outcome because it means you used fewer resources or paid less than planned, reducing the actual cost against the standard. For example, if the standard cost to produce a unit is 100 and the actual cost is 92, the variance reflects cost savings, which is considered favorable. So the statement that a favorable variance means actual costs are less than standard costs is true.