Variable Overhead Spending Variance

The variable overhead spending variance is the difference between the actual variable overhead costs incurred and the budgeted variable overhead costs. It is calculated as follows:

Variable Overhead Spending Variance = Actual Variable Overhead Costs - Budgeted Variable Overhead Costs

The variable overhead spending variance can be either positive or negative. A positive variance indicates that the actual variable overhead costs were greater than the budgeted variable overhead costs. This could be due to a number of factors, such as increased production levels, higher prices for variable overhead inputs, or inefficient use of variable overhead resources. A negative variance indicates that the actual variable overhead costs were less than the budgeted variable overhead costs. This could be due to a number of factors, such as decreased production levels, lower prices for variable overhead inputs, or efficient use of variable overhead resources.

The variable overhead spending variance is an important metric for managers to track, as it can help them to identify areas where costs can be controlled. By understanding the factors that contribute to the variable overhead spending variance, managers can take steps to reduce costs and improve profitability.

In addition to the overall variable overhead spending variance, managers may also want to track the variable overhead spending variance by individual cost item. This can help them to identify specific areas where costs are out of control and take steps to correct the problem.

The variable overhead spending variance is a valuable tool for managers to use in controlling costs and improving profitability. By understanding the factors that contribute to the variable overhead spending variance, managers can take steps to reduce costs and improve their bottom line.