Variable Overhead Spending Variance

Variable Overhead spending variance (also called variable overhead rate variance) is the product of actual units of the allocation base of variable overhead and the difference between standard variable overhead rate and actual variable overhead rate. The formula to calculate the variable overhead spending variance is:

VOH Spending Variance = ( SR − AR ) × AU

   SR is the standard variable overhead rate
   AR is the actual variable overhead rate
   AU are the actual units of allocation base

The standard variable overhead rate is the same as variable overhead application rate. The allocation base is usually the number of labor hours used. The above formula can also be stated alternatively as follows:

VOH Spending Variance = ( SR × AU ) − Actual Variable Overhead Cost


A positive value of variable overhead rate is obtained when standard variable overhead application rate is more than actual variable overhead rate whereas a negative value of variable overhead rate is obtained when actual variable overhead rate exceeds standard variable overhead rate. Thus a positive value of variable overhead spending variance is favorable and a negative value is unfavorable.

In case of a negative variable overhead spending variance, production department is usually responsible.


Calculate variable overhead spending variance if actual labor hours used are 130, standard variable overhead rate is $9.40 per direct labor hour and actual variable overhead rate is $8.30 per direct labor hour. Also specify whether the variance is favorable or unfavorable.


Standard Variable Overhead Rate$ 9.40
− Actual Variable Overhead Rate− 8.30
Difference Per Hour$ 1.10
× Actual Labor Hours130
Variable Overhead Spending Variance$143

The variable overhead variance calculated above is favorable.

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