Variable Overhead Spending Variance

What is ‘Variable Overhead Spending Variance’

The difference between actual variable overhead based on costs for indirect material involved in manufacturing, and standard variable overhead based on the budgeted costs. Variable overhead spending variance arises from difference in the costs of indirect material compared to budgeted costs. It is favorable if actual costs of indirect material – for example, paint and consumables such as oil and grease – are lower than standard variable overhead. It is unfavorable if actual costs are higher than budgeted costs.

Explaining ‘Variable Overhead Spending Variance’

Variable overhead spending variance is one of the two components of total variable overhead variance, the other being variable overhead efficiency variance. For example, in the case of a widget manufacturer, if variable overhead spending variance is favorable $5,000 (because actual indirect materials costs were lower than budgeted) and variable overhead efficiency variance is unfavorable $4,000, then total variable overhead variance is favorable $1,000.

Further Reading

  • Tracking value created by efficiency improvements in a traditional overhead cost management system – www.tandfonline.com [PDF]
  • Budgetary Control: An Opportunity for the Juvenile and Family Court – heinonline.org [PDF]
  • Regulations, market structure, institutions, and the cost of financial intermediation – www.nber.org [PDF]
  • Indicator variables model of firm's size-profitability relationship of electrical contractors using financial and economic data – ascelibrary.org [PDF]
  • International financial liberalization and economic growth – onlinelibrary.wiley.com [PDF]
  • If Someone Else Pays for Overhead, Do Donors Still Care? – journals.sagepub.com [PDF]