A recent review of actual operating results compared to budg

A recent review of actual operating results compared to budget indicates an unfavorable cost variance on both direct materials and direct labor (that is, we are spending more on materials and labor than we expected to). Which departments may be responsible for additional costs? For example, can we blame Human Resources for hiring inexperienced factory workers who have been making many mistakes causing us to waste materials?

Solution

The budget of an organization is usually not prepared by one department or by one person in a company, The budget is prepared based on the past analysis and subjected to present market conditions and inflations and availability.

The following are the responsible factors and departments for such variances:

Hence the Procurement, Top level management, Human resource, and Production are the major departments responsible for such unfavorable variances in material and labor.