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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]
… The method change variance represents the dollars saved on variable overhead items from the efficiency change … The fixed overhead spending variance reflects changes in spending on fixed overhead items … Exhibit 6. Fixed Overhead Variances (data from Exhibit 4) Page 5. 7 …

Budgetary Control: An Opportunity for the Juvenile and Family CourtBudgetary Control: An Opportunity for the Juvenile and Family Court
heinonline.org [PDF]
… The method change variance represents the dollars saved on variable overhead items from the efficiency change … The fixed overhead spending variance reflects changes in spending on fixed overhead items … Exhibit 6. Fixed Overhead Variances (data from Exhibit 4) Page 5. 7 …

Regulations, market structure, institutions, and the cost of financial intermediationRegulations, market structure, institutions, and the cost of financial intermediation
www.nber.org [PDF]
… The method change variance represents the dollars saved on variable overhead items from the efficiency change … The fixed overhead spending variance reflects changes in spending on fixed overhead items … Exhibit 6. Fixed Overhead Variances (data from Exhibit 4) Page 5. 7 …

Indicator variables model of firm's size-profitability relationship of electrical contractors using financial and economic dataIndicator variables model of firm's size-profitability relationship of electrical contractors using financial and economic data
ascelibrary.org [PDF]
… The method change variance represents the dollars saved on variable overhead items from the efficiency change … The fixed overhead spending variance reflects changes in spending on fixed overhead items … Exhibit 6. Fixed Overhead Variances (data from Exhibit 4) Page 5. 7 …

International financial liberalization and economic growthInternational financial liberalization and economic growth
onlinelibrary.wiley.com [PDF]
… The method change variance represents the dollars saved on variable overhead items from the efficiency change … The fixed overhead spending variance reflects changes in spending on fixed overhead items … Exhibit 6. Fixed Overhead Variances (data from Exhibit 4) Page 5. 7 …

If Someone Else Pays for Overhead, Do Donors Still Care?If Someone Else Pays for Overhead, Do Donors Still Care?
journals.sagepub.com [PDF]
… The method change variance represents the dollars saved on variable overhead items from the efficiency change … The fixed overhead spending variance reflects changes in spending on fixed overhead items … Exhibit 6. Fixed Overhead Variances (data from Exhibit 4) Page 5. 7 …



Q&A About Variable Overhead Spending Variance


What are costs that cannot be directly attributed to a specific unit of output?

Costs such as direct material and direct labor, on the other hand, vary directly with each unit of output.

What is variable overhead spending variance?

Variable overhead spending variance is the difference between the actual cost of variable production overheads versus what they should have cost given the output during a period.

How can you use this information for decision making purposes?

You can use this information for decision making purposes by analyzing variances in your business. This allows you to make better decisions about future operations based on current performance levels.

What does this article discuss in detail?

This article discusses how to calculate and analyze variable overhead spending variance.

Is it favorable or unfavorable?

It is favorable if actual costs of indirect material are lower than standard variable overhead. It is unfavorable if actual costs are higher than budgeted cost.

How do these costs differ from variable production overheads?

Variable production overheads include costs that cannot be directly attributed to a specific unit of output.

What is one component of total variable overhead variance?

Variable Overhead Spending Variance

What does it arise from?

It arises from the difference in the costs of indirect material compared to budgeted costs.