What indicates a positive budget variance?

A positive budget variance indicates that actual performance is better than what was originally planned in the budget. When actual expenses fall short of budgeted expenses, it means the organization spent less than anticipated, which is favorable. This situation implies that resources were managed efficiently and can improve profitability or indicate a reduction in necessary spending.

In this case, the other options describe scenarios where performance does not exceed expectations: if actual expenses exceed the budgeted expenses, that would lead to a negative variance. Similarly, actual revenue falling short of budgeted revenue also results in a negative variance, showcasing that the organization did not meet its revenue targets. Lastly, actual revenue aligning with budgeted revenue indicates that there is no variance, which means the performance is neither favorable nor unfavorable. Thus, the proper understanding illustrates that lower than budgeted expenses signify a positive outcome in financial performance.