What is 'Unfavorable Variance'
Unfavorable variance is an accounting term that describes instances where actual costs are greater than the standard or expected costs. An unfavorable variance can alert management that the company's profit will be less than expected. The sooner an unfavorable variance is detected, the sooner attention can be directed towards fixing any problems.
In manufacturing, the standard cost of a finished product is calculated by adding the standard costs of the direct material, direct labor and direct overhead. An unfavorable variance is the opposite of a favorable variance where actual costs are less than standard costs.
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BREAKING DOWN 'Unfavorable Variance'
In finance, unfavorable variance refers to a difference between an actual experience and a budgeted experience in any financial category where the actual outcome is less favorable than the projected outcome. For example, if sales were budgeted to be $200,000 for a period but were actually $180,000, there would be an unfavorable (or negative) variance of $20,000, or 10%. Similarly, if expenses were projected to be $200,000 for a period but were actually $250,000, there would be an unfavorable variance of $50,000, or 25%.

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What does an unfavorable variance indicate to management?
Learn what an unfavorable variance indicates to management, such as problems with meeting expense and revenue targets or ... Read Answer >> 
How is an unfavorable variance discovered?
Learn how unfavorable variance is discovered through defining budget numbers, such as standard rates for labor and materials, ... Read Answer >> 
What is price variance in cost accounting?
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What is the difference between standard deviation and variance?
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How much variance should an investor have in an indexed fund?
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