Which term describes the difference between the actual expense and the budgeted goal when the goal is not met?

Which term describes the difference between the actual expense and the budgeted goal when the goal is not met?

• A. Overage
• B. Break-even
• C. Variance
• D. In the red

Answer: (C)

When you compare planned spending to what actually happened, the difference is called a variance. It measures how far the actual expenses deviate from the budgeted amount, especially when the goal isn’t reached. Variances can be favorable (you spent less than planned) or unfavorable (you spent more than planned). For example, budgeting $100,000 but spending $110,000 results in a $10,000 unfavorable variance; spending $95,000 results in a $5,000 favorable variance. The other terms don’t describe this comparison: overage is more a descriptive label for exceeding a limit, break-even is the point where income equals costs, and being in the red refers to overall negative finances rather than the specific budget-to-actual gap.

When you compare planned spending to what actually happened, the difference is called a variance. It measures how far the actual expenses deviate from the budgeted amount, especially when the goal isn’t reached. Variances can be favorable (you spent less than planned) or unfavorable (you spent more than planned). For example, budgeting $100,000 but spending $110,000 results in a $10,000 unfavorable variance; spending $95,000 results in a $5,000 favorable variance. The other terms don’t describe this comparison: overage is more a descriptive label for exceeding a limit, break-even is the point where income equals costs, and being in the red refers to overall negative finances rather than the specific budget-to-actual gap.