Question

The activity variance for revenue is favorable if the actual revenue for the period exceeds the revenue in the static planning budget. True or False

Answer 1

Ans: “True”

The answer is true because of the following reason;

In Static Planning budget the values of anticipated values of inputs and outputs are already anticipated for the period, in advance before that period in question actually begins. So, the actual results often different in numbers from the numbers anticipated in static budget.

The activity variances are the differences between the actual results and the static budget. These variances help the organisation in identifying whether the differences were favourable i.e increased revenue or unfavourable i.e decreased revenue. Therefore, if an organization’s revenue exceeds the expectations, then it is categorised as favourable result. So, the activity variance for revenue is favourable if the actual revenue for the period exceeds the revenue expected in the static planning budget.