What type of variance indicates positive results in a budget?

A favorable variance indicates positive results in a budget because it occurs when the actual revenues exceed the budgeted revenues or when actual expenses are less than the budgeted expenses. This situation signifies that the organization is performing better than expected, resulting in higher profits or lower costs.

For instance, if a company's budget anticipated expenses of $10,000 but actual expenses were only $8,000, the favorable variance is $2,000. This situation positively impacts the organization's financial health, allowing for potentially greater reinvestment or savings.

The other types of variances convey different scenarios: adverse variance indicates a negative outcome where actual performance is worse than planned, neutral variance suggests there is no significant difference between actual and budgeted figures, while marginal variance, a less commonly used term, typically implies a minor difference that wouldn't significantly affect overall performance.