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. Absorption Costing

    A managerial accounting cost method of expensing all costs associated ...
  6. Overhead

    An accounting term that refers to all ongoing business expenses ...
Related Articles
  1. Entrepreneurship

    Six Steps To A Better Business Budget

    This easy but essential process helps owners ensure that their businesses can stay afloat.
  2. Fundamental Analysis

    Spotting Profitability With ROCE

    This straightforward ratio measures whether a company is efficient, money-making or neither.
  3. Fundamental Analysis

    Analyzing Operating Margins

    Find out how to put this important component of equity analysis to work for you.
  4. Entrepreneurship

    Business Startup Costs: It's In The Details

    Don't overlook the details when starting up a business. It's the small expenses that have the potential to make or break a great idea.
  5. Investing

    What are the risks of having both high operating leverage and high financial leverage?

    In finance, the term leverage arises often. Both investors and companies employ leverage to generate greater returns on their assets. However, using leverage does not guarantee success, and the ...
  6. Investing

    Operating Leverage Captures Relationships

    Find out how fixed and variable costs interact to shed new light on old companies.
  7. Taxes

    What is the best method of calculating depreciation for tax reporting purposes?

    Learn the best method for calculating depreciation for tax reporting purposes according to generally accepted accounting principles, or GAAP.
  8. Fundamental Analysis

    Are accounts receivable used when calculating a company's debt collateral?

    Learn how accounts receivables are recorded as assets on a balance sheet; they are used when calculating a company's total debt collateral.
  9. Professionals

    Master Limited Partnership (MLP)

    A master limited partnership, also referred to as an MLP, is a publicly traded partnership, where the limited partnership interests are traded much like shares in a corporation.
  10. Professionals

    Human Resource Planning

    Just as companies must plan ahead to ensure a steady supply of raw materials, machinery and office space, they must also plan ahead to maintain a steady supply of quality employees. Human resource ...

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center