Variable Overhead Spending Variance

Variable overhead spending variance is the difference between actual variable overhead based on costs for the indirect material involved in manufacturing, and standard variable overhead based on the budgeted costs. Variable overhead spending variance arises from the 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.

Variable overhead spending variance is the result of a difference between the actual costs of indirect material compared to the actual costs. Variable overhead spending variance is one of the two components of total variable overhead variance. The other component is variable overhead efficiency variance.

For example, in the case of a widget manufacturer, the grease for the widget press and the widget paint and widget press tuner actually end up costing $5,000 less than budgeted, the variable overhead spending variance would be a favorable $5,000. Then, 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.