Answer: Option D
Explanation: In simple words, favorable variance can be any of the two situation either when the actual cost of a project is less than its budgeted cost at the same level of activity or when the actual revenue is more than the budgeted revenue at the same level of activity.
In both the cases, the producer will be benefited as there will be a profit to the project leading to increase in operating income. Hence the correct option is D.
