WGU D196 Variance Analysis Certification Exam
Questions and Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant Download Pdf
1. What is the primary purpose of variance analysis in managerial
accounting?
A. To prepare external financial statements
B. To compare actual results with budgeted expectations
C. To eliminate all business costs
D. To calculate employee salaries
Answer: B. To compare actual results with budgeted expectations
Rationale: Variance analysis is a managerial accounting tool used to
identify differences between planned (budgeted) amounts and actual
results. Managers use these differences to evaluate performance,
identify problems, and make corrective decisions.
2. A favorable variance occurs when:
A. Actual revenue is lower than budgeted revenue
B. Actual expenses are higher than budgeted expenses
,C. Actual results improve profitability compared with the budget
D. Budgeted amounts are identical to actual amounts
Answer: C. Actual results improve profitability compared with the
budget
Rationale: A favorable variance means actual performance is better
than expected. This can occur when revenues are higher than budgeted
or expenses are lower than budgeted, resulting in improved income.
3. An unfavorable variance indicates that:
A. Actual performance exceeded expectations
B. Actual results negatively affected profitability
C. Budget assumptions were eliminated
D. Costs were accurately predicted
Answer: B. Actual results negatively affected profitability
Rationale: An unfavorable variance occurs when actual results are
worse than planned. Examples include higher-than-expected costs or
lower-than-expected revenues.
, 4. Which formula correctly calculates a cost variance?
A. Budgeted Cost − Actual Cost
B. Actual Cost − Budgeted Cost
C. Actual Revenue − Budgeted Revenue
D. Budgeted Revenue + Actual Revenue
Answer: A. Budgeted Cost − Actual Cost
Rationale: Cost variances are commonly calculated as budgeted cost
minus actual cost. A positive result indicates a favorable variance
because costs were lower than expected.
5. Which type of variance measures the difference between actual sales
revenue and budgeted sales revenue?
A. Cost variance
B. Labor variance
C. Revenue variance
D. Efficiency variance
Answer: C. Revenue variance
Questions and Correct Answers (Verified Answers) Plus
Rationales 2026 Q&A | Instant Download Pdf
1. What is the primary purpose of variance analysis in managerial
accounting?
A. To prepare external financial statements
B. To compare actual results with budgeted expectations
C. To eliminate all business costs
D. To calculate employee salaries
Answer: B. To compare actual results with budgeted expectations
Rationale: Variance analysis is a managerial accounting tool used to
identify differences between planned (budgeted) amounts and actual
results. Managers use these differences to evaluate performance,
identify problems, and make corrective decisions.
2. A favorable variance occurs when:
A. Actual revenue is lower than budgeted revenue
B. Actual expenses are higher than budgeted expenses
,C. Actual results improve profitability compared with the budget
D. Budgeted amounts are identical to actual amounts
Answer: C. Actual results improve profitability compared with the
budget
Rationale: A favorable variance means actual performance is better
than expected. This can occur when revenues are higher than budgeted
or expenses are lower than budgeted, resulting in improved income.
3. An unfavorable variance indicates that:
A. Actual performance exceeded expectations
B. Actual results negatively affected profitability
C. Budget assumptions were eliminated
D. Costs were accurately predicted
Answer: B. Actual results negatively affected profitability
Rationale: An unfavorable variance occurs when actual results are
worse than planned. Examples include higher-than-expected costs or
lower-than-expected revenues.
, 4. Which formula correctly calculates a cost variance?
A. Budgeted Cost − Actual Cost
B. Actual Cost − Budgeted Cost
C. Actual Revenue − Budgeted Revenue
D. Budgeted Revenue + Actual Revenue
Answer: A. Budgeted Cost − Actual Cost
Rationale: Cost variances are commonly calculated as budgeted cost
minus actual cost. A positive result indicates a favorable variance
because costs were lower than expected.
5. Which type of variance measures the difference between actual sales
revenue and budgeted sales revenue?
A. Cost variance
B. Labor variance
C. Revenue variance
D. Efficiency variance
Answer: C. Revenue variance
