Variable overhead costs are those expenses that fluctuate with the level of production or business activity. These costs include utilities, supplies, and other expenses that change with the level of output. The VORV Calculator aids in identifying discrepancies between what was expected (standard) and what actually occurred (actual), offering valuable insights into operational efficiency.
Formula of Variable Overhead Rate Variance Calculator
The fundamental formula used in the Variable Overhead Rate Variance Calculator is:
VORV = (Actual Variable Overhead Rate - Standard Variable Overhead Rate) * Actual Hours Worked
Where:
VORVis the Variable Overhead Rate Variance.Actual Variable Overhead Rateis the actual rate at which variable overhead costs were incur per hour.Standard Variable Overhead Rateis the predetermined rate at which variable overhead costs were expected to be incurred per hour.Actual Hours Workedis the actual number of hours work during the period.
Understanding this formula is essential for effectively using the calculator and interpreting its results.
Variable Overhead Rate Variance Table
To enhance user convenience and provide a quick reference, the following table outlines general scenarios and their corresponding VORV values, assuming standard variables:
| Actual Hours Worked | Standard Rate (per hour) | Actual Rate (per hour) | VORV |
|---|---|---|---|
| 100 | $15 | $20 | $500 |
| 200 | $15 | $17 | $400 |
| 300 | $15 | $15 | $0 |
| 400 | $15 | $13 | -$800 |
| 500 | $15 | $10 | -$2500 |
Note: These values are illustrative and should be adjusted according to specific business data.
Example of Variable Overhead Rate Variance Calculator
Let’s illustrate with an example. Consider a manufacturing company that has a standard variable overhead rate of $15 per hour. In a particular month, the actual variable overhead rate was $20 per hour, and the actual hours worked were 100 hours. Using our formula:
VORV = ($20 - $15) * 100 = $5 * 100 = $500
This result indicates a negative variance, meaning that the company spent more on variable overheads than planned.
Most Common FAQs
Variable Overhead Rate Variance is the difference between what a business expected to spend on variable overhead per hour and what it actually spent, multiplied by the actual hours of operation.
Calculating VORV helps businesses in budgeting, understanding cost behavior, and improving operational efficiency by identifying areas where actual spending deviates from the planned budget.
Yes, VORV is a versatile tool applicable across various business types, especially those with significant variable overhead costs that fluctuate with production levels.