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Variance analysis
Favorable and unfavorable variances
A favorable variance improves profit versus plan (revenue above, cost below); an unfavorable one reduces it. The sign of the raw difference depends on the line, so the label says what it means.
Owned by: Entry analystTest band: Entry analyst
In practice
Cost under budget is favorable — but ask whether it is savings or delay. Under-spent marketing in Q1 usually means over-spent Q2.
The kind of thing the test asks
- Marketing spend came in $30k under budget this month. How is that variance labeled?
More in variance analysis
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