Variable Overhead Spending Variance

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Variable Overhead Efficiency Variance

    The difference between actual variable overhead based on the ...
  2. Applied Overhead

    A type of overhead that is recorded under the cost-accounting ...
  3. Overhead Rate

    In managerial accounting, a cost added on to the direct costs ...
  4. Variable Cost

    A corporate expense that varies with production output. Variable ...
  5. Overhead

    An accounting term that refers to all ongoing business expenses ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated ...
Related Articles
  1. Six Steps To A Better Business Budget
    Entrepreneurship

    Six Steps To A Better Business Budget

  2. Spotting Profitability With ROCE
    Fundamental Analysis

    Spotting Profitability With ROCE

  3. Analyzing Operating Margins
    Fundamental Analysis

    Analyzing Operating Margins

  4. Business Startup Costs: It's In The ...
    Entrepreneurship

    Business Startup Costs: It's In The ...

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center