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Financial & Managerial Accounting
Found in: Page 967
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

What department is usually responsible for a direct labor rate variance? What department is usually responsible for a direct labor efficiency variance? Explain.

CategoryResponsible Department
Direct labor rate variance Human resource department
Direct labor efficiency varianceProduct department
See the step by step solution

Step by Step Solution

Step 1: Meaning of Human Asset

In technical terms, human asset denotes the labor force working in an organization to accomplish common goals stated by the upper management. The human asset consists of individuals known as employees or team members.

Step 2: Identification of responsible departments

Usually, for direct labor rate, the human resource department of a company is held responsible because such department has the authority to determine and decide the labor rates and evaluates the variances for performance review of the human asset.

In addition, the production department of an entity is held responsible for the direct labor efficiency variance because the labor force performs its assigned task in such a department, and the production department’s head analyzes their performance.

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