In terms of calculating variances, what does "favorable" imply?

"Favorable" in the context of calculating variances implies that actual costs are lower than standard costs. This suggests that the organization has performed better than expected in terms of cost management. When actual costs are lower than what was budgeted or estimated (the standard costs), it indicates cost efficiency and can lead to increased profitability. This positive variance shows that resources have been utilized effectively, and it reflects a strong financial performance relative to the planned costs.

In contrast to this favorable scenario, if actual costs were higher than standard costs, it would indicate inefficiencies or overspending, which would be deemed an unfavorable variance.