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Chapter 13

7.4 Variances

Budgetary control is achieved by comparing the actual results with the budget. The
differences are calculated as variances and management action may be taken to
investigate and correct the variances if necessary or appropriate.

 If costs are higher or revenues are lower than the budget, then the difference is
an adverse variance.

 If costs are lower or revenues are higher than the budget, then the difference is
a favourable variance.

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