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(a) Purchasing Manager
The purchasing manager on first glance, appears to have performed well as the materials price variance which he is responsible for is just over $2,000 favourable. This could mean that there has been a drop in the market rate for these goods, or that he has purchased wisely by using alternative suppliers or by obtaining discounts resulting in the material he has bought costing less than was expected.
However, such variances should not be looked at in isolation when understanding performance. We can see that the materials usage variance overall is adverse, this could result from the cheaper materials bought being an inferior quality and hence causing more wastage. As the mix variance is adverse this is probably not the case and so we could conclude that the purchasing manager has indeed performed well.
Production Manager
The production manager is responsible for the materials mix and yield variances. In total these are $2,551 adverse which implies that the production manager has not done as good a job as he could have. This could be due to wastage if the material the purchasing manger has bought is an inferior quality. However, when looking at the individual variances it can be seen that the mix variance is adverse, which means that the mix has been altered in favour of a more expensive material and less of a cheaper material has been used. The yield variance is favourable and so more output has been obtained than expected from the input to the process. One possible explanation for this would be that the production manager has decided to use more of the expensive material perhaps to take advantage of the fall in price. This may have led to a better quality product overall. This revised mix using more of meat and possibly also sauce and less of vegetables may mean that there is less wastage. Vegetables due to their nature may deteriorate quickly meaning more wastage is likely.
If this is the case and this has contributed to the improvement in sales then it could be said that the production manager has actually performed well.
Sales manager
The sales manger has two favourable variances, with the overall sales variance being $9,010 more than expected. This means that both the selling price achieved was higher than expected and more units were sold than expected. This looks like a very strong performance.
However, such variances should not be looked at in isolation when understanding performance. This benefit may be entirely due to the efforts of the sales manager and his team but it could also be due to the efforts made by managers in other areas of the business. For example, If the reason for the adverse mix and favourable yield variance was indeed a better quality mix and product, customers may prefer the resulting better quality product and therefore not only buy more of it but also be prepared to pay more for it.
RTF performance
Assuming the labour and variable overhead aren’t impacted by these variances it would seem as though the performance of RTF is good as the benefit from the favourable sales variances outweigh the adverse material variances. It would seem that the decisions taken by all managers have contributed to an overall improvement in performance.