A budget variance refers to the difference between the budgeted (planned or expected) figures and the actual figures for a particular financial period.
Favourable variance
A favourable variance occurs when actual results are better than the budgeted figures. For example, if costs are lower than expected or revenues are higher than planned.
Adverse variance
An adverse variance occurs when actual results are worse than the budgeted figures. This can happen when costs are higher than expected or revenue is lower than planned.
