What is a Controllable Variance?

Definition: The controllable variance consists of a combination of variable and fixed overhead variances that management has influence over. In other words, it’s a set of overhead variances that management has the power to change or manipulate.

What Does Controllable Variance Mean?

An overhead variance is the difference between the predetermined, budgeted amount that management applies during production processes and the actual amount used during those processes. Overhead variances are usually split into two main categories: fixed and variable.

Both fixed and variable overhead are similar to fixed and variable costs. Fixed overhead consists of the overhead costs that remain the same as production increases or decreases. A good example of this is rent. The rent expense will stay the same no matter how many or how few products are produced during the period.

Variable overhead costs are the remaining costs that change with the changes in production. Utilities are a good example. As production increases, so do electric bills. As the factory machines are used more to produce more units, the utilities are used more.


The controllable variance contains the fixed and variable overhead variances that can be influenced by management. These include variable spending, variable efficiency, and fixed spending variances.

The spending variances occur when management negotiates a different price than the standard retail price. For example, management might negotiate a discounted price on materials from a vendor because of bulk orders. Negotiated prices lower than the standard prices result in a favorable variable. Higher prices result in an unfavorable variance.

Efficiency variances occur when the budgeted amount of inputs in a production process differs from the actual. Direct labor is a good example. Management might estimate that a job requires 100 hours of direct labor when it only takes 89 hours.

As you can see with both spending and efficiency variances, management has power to influence them by negotiating better terms or increase production efficiencies.