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I ACG 2071 Extra Credit Assignment A favorable variance for a cost means that when compared to the budget, the actual cost 2.
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1. A favorable variance for a cost means that when compared to the budget, the actual cost is less than the budgeted cost.

Budgeted costs are usually set at higher side. If actual cost is less than the budgeted cost then it would mean that there is a cost benefit and favorable variance.

2. In preparing flexible budgets, the costs that remain constant in total are fixed costs. Those costs that change in total are variable costs.

Fixed costs remain fixed irrespective of the volume or units of output produced. Variable costs change in proportion to the change in the level of units of production.  

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