overhead variance

Overhead variance refers to the difference between budgeted overhead costs and the actual overhead costs incurred during a specific period. Overhead costs include expenses that are not directly tied to production, like rent, utilities, and administrative salaries. When a business analyzes overhead variance, it helps them understand whether they spent more or less than expected on these indirect expenses. A positive variance indicates lower costs than budgeted, while a negative variance suggests higher costs. Understanding this variance is crucial for effective financial management and can inform future budgeting decisions.