Variable-overhead spending variance
Variable-overhead spending variance is the difference between actual variable overhead incurred and the standard rate applied to actual hours worked. A favourable variance means variable overhead cost less per hour than the standard rate.
FrameworkStandard costing and variance analysis
What it is
See it move
Variable overhead was budgeted at €6 per hour. Actually, 2,000 hours cost €13,000 in total — €6.50 per hour, €0.50 above standard. Multiplying that €0.50 overspend by the 2,000 actual hours worked gives a €1,000 adverse spending variance. It isolates the price paid for overhead resources, holding hours constant at the actual figure; hours are captured separately by the efficiency variance.
The formula
Variables
- Standard variable overhead rate per activity hour (€ per hour)
- Actual variable overhead rate per hour (actual VOH incurred ÷ actual hours worked) (€ per hour)
- Actual hours of the activity base worked during the period
Favourable when actual rate is below standard; isolates the price effect on variable overhead, holding hours constant at actual