Spending variance is 300 Unfavourable.
SR = 7500 / 500 = 15
AR = 9300 / 600 = 15.5
Spending variance = (SR - AR ) AH
= (15 - 15.5 ) 600
= 300 Unfavourable.
Spending variance, also known as rate variance, is the difference between the actual amount of an expense and the budgeted amount. If you have a utility bill of $250 in January and you expect to incur an expense of $150, you have an unfavorable expense variance of $100.
Spending variance is the difference between the actual amount of an expense and the expected (or budgeted) amount. So if a company has spent $500 on utilities in January and plans to spend $400, the result is a $100 unwanted spending difference.
There are many variations in calculating the spending variance for different types of expenses, but the basic formula for this calculation is:
1) Actual Cost - Expected Cost = Expense Variance.
2) (Actual Variable Burden Rate - Projected Variable Burden Rate) x Work Hours = Variable Burden Cost Variance.
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