If you spend less money on an item than you planned to spend, this is an unfavorable variance in your budget analysis. True / False.

false

Explanation:

Price variances arise from a difference in the unit price per budget known as the standard price and the actual price (cost) incurred in the purchase.

Where the actual price paid for materials is higher than the standard price, the price variance is said to be unfavorable.

On the other hand, if the actual price of the materials is lower than the standard price, it is said to be a favorable price variance.

As such, If you spend less money (actual) on an item than you planned (standard) to spend, this is a favorable variance in your budget analysis.

The right answer is false.