Favorable Variance Law and Legal Definition

Favorable Variance is a variance created by using or spending less of a given resource than specified by the standard, often categorized as rate of efficiency, usage or price. However, in a standard costing system, some favorable variances are not indicators of efficiency in operations. For example, the materials price variance, the labor rate variance, the manufacturing overhead spending and budget variances, and the production volume variance are generally not related to the efficiency of the operations.