If you were to compare a static planning budget to actual activity and the actual activity is higher, you would have an unfavorable activity variance.
Companies usually budget their expenses so that they can spend accordingly. They also budget their revenue so as to plan for the next fiscal year.
When there is an unfavorable activity variance, it means that:
- In the case of expenses, there were more expenses than were budgeted for.
- In the case of revenue, there were less sales than were budgeted for.
We can therefore conclude that unfavorable activity variances are the problems that arise when actual activity is higher than budgeted activity.
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