The Overhead Spending Variance (OSV) measures the difference between the actual overhead costs (both fixed and variable) incurred and the overhead costs that were expected based on the actual level of production.

It is calculated as:

Overhead Spending Variance = Actual Overhead − Applied Overhead

Where:

• Actual Overhead is the sum of actual fixed and variable overhead costs.

• Applied Overhead is the total overhead that would have been applied based on the standard cost system, calculated as:

Applied Overhead = (Actual Production Units) × (Fixed Overhead Rate per Unit + Variable Overhead Rate per Unit)