Question 64

Actual revenue is higher than budgeted revenue.

A favorable revenue variance indicates that the actual revenue generated by the company surpasses the amount that was initially budgeted or expected.

A) The company sold fewer units than expected.

This option is incorrect because selling fewer units would typically lead to lower revenue than anticipated, resulting in an unfavorable revenue variance, not a favorable one.

B) The company's costs exceeded its revenue.

This statement is also incorrect. If costs exceed revenue, it indicates a loss or unfavorable variance, rather than a favorable revenue variance, which specifically refers to revenue being higher than budgeted.

C) Actual revenue is higher than budgeted revenue.

This option is correct as it accurately describes a favorable revenue variance, which occurs when the actual revenue exceeds the budgeted revenue, indicating better-than-expected financial performance.

D) Actual revenue is lower than budgeted revenue.

This choice is incorrect because a scenario where actual revenue is lower than budgeted indicates an unfavorable revenue variance, not a favorable one.

Conclusion

In summary, the correct answer is C, as it directly defines a favorable revenue variance. Options A, B, and D all describe scenarios that would lead to unfavorable variances, failing to align with the concept of favorable performance in revenue generation.