A variance is the difference between a budgeted (planned) amount and the actual amount. A favorable variance occurs when actual results are better than budget — higher revenue than expected, or lower expenses. An unfavorable variance occurs when actual results are worse — lower revenue or higher expenses. Variances are the output of variance analysis, the practice of systematically comparing actual performance to the budget to identify deviations and their causes. The labels “favorable” and “unfavorable” describe the effect on profit, not the quality of management — an unfavorable revenue variance might be caused by a market downturn outside anyone’s control, and a favorable expense variance might result from deferred maintenance that creates problems later.