Variable Overhead

Variable Overhead
The indirect costs of operating a business that fluctuate somewhat with the level of business activity, but are incurred even if business activity is minimal. While most overhead costs such as rent, salaries and insurance are typically fixed, overhead costs that increase with higher business activity and decrease with lower business activity are termed as variable overhead. These usually consist of indirect material, indirect labor and other costs that cannot be directly allocated to a specific product, such as expenses for utilities and equipment maintenance.

For example, utility expenses for electric power are incurred by a manufacturing plant every month; the actual amount owed for such expenses depends on the level of manufacturing output. However, even if the plant produces no output in a given month – for reasons such as a labor dispute or shortage of a critical input material – it still needs to “keep the lights on” in order to keep the plant in working condition, and will be billed by the utility accordingly.


Investment dictionary. . 2012.

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Look at other dictionaries:

  • 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 …   Investment dictionary

  • Variable Overhead Efficiency Variance — The difference between actual variable overhead based on the true time taken to manufacture a product, and standard variable overhead based on the time budgeted for it. It arises from variance in productive efficiency. For example, the number of… …   Investment dictionary

  • variable overhead expenditure variance — In a system of standard costing, the difference arising between the variable overhead budgeted and the variable overhead incurred. See: overhead expenditure variance …   Accounting dictionary

  • variable overhead total variance — In a system of standard costing, the total difference arising between the standard variable overhead absorbed for the actual units produced and the actual variable overhead expenditure incurred. See: overhead total variance …   Accounting dictionary

  • variable overhead efficiency variance — In a system of standard costing, the difference arising between the actual labour hours worked and the standard time allowed for the quantity actually produced, valued at the standard variable overhead absorption rate per hour. See: overhead… …   Accounting dictionary

  • standard variable overhead cost — A standard cost derived from the standard time allowed for the performance of an operation or the production of a product and the standard variable overhead absorption rate per unit of time for that operation or product …   Accounting dictionary

  • standard variable overhead cost — A standard cost derived from the standard time allowed for the performance of an operation or the production of a product and the standard variable overhead absorption rate per unit of time for that operation or product …   Big dictionary of business and management

  • variable overhead cost — The elements of an organization s indirect costs for a product that vary in total in proportion to changes in the levels of production or sales. Examples can include power, commission earned by sales personnel, and consumable materials …   Accounting dictionary

  • variable overhead cost — The elements of an organization s indirect costs for a product that vary in total in proportion to changes in the levels of production or sales. Examples can include power, commission earned by sales personnel, and consumable materials …   Big dictionary of business and management

  • overhead efficiency variance — overhead productivity variance; = productivity variance In a standard costing system, that part of the overhead total variance that arises from the more or less efficient use of the time available to carry out the actual production. It compares… …   Accounting dictionary

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