Which of the following budgeted expenses has a favourable variance?

Question

BlackTom AI · Accepted Answer

An expense variance is favorable when actual spending is less than the budgeted amount; here the telephone budgeted expense is $4,000 and actual expense is $3,700, so this is favorable.

1. Relevant knowledge points and concepts
- Variance = Budgeted amount − Actual amount (for expenses, a positive result means actual is lower than budget and thus favorable).
- A favorable variance indicates cost control or savings; an unfavorable variance indicates overspending.
- Percentage variance = (Variance / Budgeted amount) × 100% helps assess materiality.

2. Step-by-step reasoning process
- Identify budgeted and actual figures for the telephone expense.
- Compute the variance by subtracting actual from budgeted.
- Determine sign and interpret (positive = favorable for expenses).

3. Calculations with intermediate steps
- Budgeted telephone expense = $4,000
- Actual telephone expense = $3,700
- Variance = $4,000 − $3,700 = $300
- Percentage variance = ($300 / $4,000) × 100% = 7.5%

4. Why the correct answer is correct
- The variance is +$300 (budgeted exceeds actual), so the company spent $300 less than planned on telephone expense. For expense accounts, spending less than budgeted is favorable because it increases operating margin relative to plan.

5. Why other options (general explanation) would be incorrect
- Any option where actual > budgeted would be an unfavorable variance because it represents overspending.
- If actual = budgeted, the variance would be zero (neither favorable nor unfavorable).
- Since the telephone example shows actual < budgeted, it is the only favorable example provided.

6. Conclusion confirming the answer
- The telephone expense (Budget $4,000; Actual $3,700) has a favorable variance of $300 (7.5%), which matches the provided correct answer.

Which of the following budgeted expenses has a favourable variance?单项选择题

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