A favourable variance will arise when capital revenues are . . . . . . . . than expected.

The correct answer is A. more.

A favourable variance is a difference between actual and budgeted results that is favorable to the company. It occurs when actual results are better than budgeted results. In the case of capital revenues, a favourable variance will arise when actual capital revenues are more than budgeted capital revenues.

Option B is incorrect because a less than expected amount of capital revenues would result in an unfavorable variance. Option C is incorrect because “lesser” is not a word that is used in accounting. Option D is incorrect because it is not a valid option.