Nutty Ltd processes whole nuts and grains to produce and sell healthy cereal products such as muesli and cereal bars. It buys unprocessed grains and nuts and processes the grains with additives (e.g. sugar, and other flavourings) to produce the museli and cereal bars. In the process, some grains and nuts are "cleaned" or have the outer layer removed, meaning that there is substantial loss of weight in the process. The market for the products of Nutty Ltd has been stable and is expected to remain so.

Nutty Ltd uses a variance analysis system to monitor its performance. There has been some concern about the interpretation of the variances that have been calculated in January, as follows:

The purchasing manager is adamant, despite criticism from the production director, that he has purchased wisely and saved the company a lot of money in purchase costs, especially as food costs (wheat, maize etc) increase due to supply shortages. The purchasing manager has sourced new suppliers in recent months as well as securing supplies for the coming months.

The production director is upset at being criticised for increasing the wage rates for January. He feels the decision was the right one as morale was poor and he had to do something about it.

The maintenance manager feels that saving 4,500 on fixed overheads has helped the profitability of the business. He argues that the process machine annual maintenance can wait for another month without a problem as the machines have been running well.

The variances for January were calculated as follows:

Material price24,000 (Fav)

Material usage26,000 (Adv)

Labour rate7,500 (Adv)

Labour efficiency 9,000 (Fav)

Labour idle time6,000 (Fav)

Variable overhead expenditure9,000 (Adv)

Variable overhead efficiency15,000 (Fav)

Fixed overhead expenditure4,500 (Fav)

Sales price42,500 (Adv)

Sales volume10,500 (Adv)

Variable overhead is attributed to products on the basis on labour hours.

Required

Comment on the performance of the purchasing manager, the production director and

the maintenance manager based on the variances given above for January. Reach a conclusion as to whether or not each manager performed well.