When a 'Bad' Variance Is Actually Good

Variance analysis is basically checking whether the company stayed on track or went off track.

It compares the budgeted figures with actual results. And there are two types of variance,

right? Favorable and adverse. Yes. A favorable adverse means the business

performed better than expected. Maybe income was higher or costs were lower.

An adverse variance means performance was worse than expected. Income was lower or costs were higher.

But an adverse variance isn't always bad, right? Correct. For example,

the marketing department spent more than planned. That's an adverse cost variance.

But if spending boosted sales a lot, then overall performance can still improve.