A difference from budget that improves profit: revenue above plan or costs below it.
A favorable variance is a gap between actual results and the budget that helps profit. For revenue it means actual is above plan; for a cost it means actual is below plan. The opposite is an unfavorable, or adverse, variance. The sign depends on the line, which is why variance reports label direction in words rather than relying on plus and minus.
Revenue variance = actual − budget; favorable when positive. Cost variance = budget − actual; favorable when positive.
Revenue budgeted at $500,000 comes in at $540,000: a $40,000 favorable variance. Costs budgeted at $300,000 come in at $285,000: a $15,000 favorable variance. Together they add $55,000 to profit against plan.
Assuming favorable means good. Costs under budget can mean a hire that slipped or maintenance that was skipped, and revenue above plan can come from a one-time order. Explain each variance by its cause, not just its sign. The full guide is variance analysis.