How is variable overhead expenditure variance calculated?

Variable overhead expenditure variance is determined by analyzing the difference between the actual cost incurred for variable overheads and the standard cost that was expected for those overheads based on the actual level of activity. This variance reflects how much more or less was spent on variable overheads compared to what was budgeted, thus allowing management to assess the efficiency and effectiveness of variable overhead control.

Calculating this variance takes into account the actual expenses that the business has incurred in its operations and compares it against the standard costs that were predetermined. This helps in identifying any discrepancies which can be further analyzed for potential areas of improvement in cost management and operational efficiency.

In contrast, comparing actual hours worked with budgeted hours focuses on the efficiency of labor rather than expenditure variances. Calculating actual output produced relates primarily to productivity measurements and not directly to overhead variances. Lastly, assessing the difference in total fixed costs pertains to fixed overhead costs, which differs from the variable overhead expenditure analysis as it does not factor in the variable nature of the costs in question.