Favorable and unfavorable variances

Favorable and unfavorable variances(Standard costing):

Variances may be favorable [ Positive or Credit ] or unfavorable [ Negative or Adverse or Debit ] depending upon whether the actual resulting cost is less or more than the standard cost.

Favorable variance:

When the actual cost incurred is less than the standard cost, the deviation is known as favorable variance. The effect of the favorable variance increase the profit.

Unfavorable variance:

When the actual cost is incurred is more than the standard cost, there is variance is known unfavorable or adverse variance. Unfavorable variance refers to deviation to the loss of business.