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Chilton allocates variable manufacturing overhead costs on the basis of machine hours. Chilton budgeted .5 machine hours per lamp and allocates overhead at a rate of $1.80 per machine hour. Last year Chilton manufactured 23,000 lamps, used 13,800 machine hours and incurred actual overhead costs of $15,180.
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 â for example, paint and consumables such as oil and grease â are lower than standard variable overhead.