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Budgeting & Forecasting › Variance Analysis

How does responsibility for variances get assigned across departments?

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Answer

Variances are assigned to the responsible function: price variances to purchasing, usage to production, rate to HR/production, sales price and volume to sales/marketing. But interdependencies mean one department's action can cause another's variance (e.g., purchasing buying cheap material causing production waste), so investigation should trace root causes, not just allocate blame.
Real-world example The adverse usage variance is traced to purchasing's cheaper material, not the production team.

Common follow-ups: Who owns the price variance? | Why can blame be misassigned?

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All 38 Variance Analysis questions