Which of the following describes an unfavorable variance?

An unfavorable variance occurs when the financial performance of a business does not meet the expectations set in the budget or forecast. This typically means that the actual results are worse than anticipated, leading to a negative impact on profitability or performance metrics.

In this context, when there is a decrease in operating income relative to the budget, it indicates that the business is not generating as much income as planned. This could be due to various factors such as higher expenses, lower sales volume, or decreased efficiency. The decrease in operating income reflects a negative variance because the actual results are falling short compared to what was projected.

The other choices describe various scenarios, but they do not depict an unfavorable variance. An increase in overall expenses, while it can contribute to unfavorable variances, does not alone define one. An increase in operating income indicates better performance than budgeted, which is favorable. A decrease in fixed costs generally suggests improved financial health, depending on the context, as it could lead to better margins. Therefore, the option that directly corresponds to an unfavorable variance is the decrease in operating income relative to the budget.