Andrea is the Chief Financial Officer at Big Corporation and is completing aVariance Analysis. She has reviewed the production costs of creating item B, and this month’s costs show avariance to budget of £-200. What does this mean?
Anegative varianceto budget means that the companyspent £200 less than expected, which is apositive outcome. While it may seem counterintuitive, a negative variance inthis context indicates cost savings rather than overspending.Option D is incorrectbecause the organisation has saved £200, not gained it. (See p.198)
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