Performance Management Essay

4751 Words Oct 15th, 2013 20 Pages
Answers

Fundamentals Level – Skills Module, Paper F5 Performance Management 1 Chaff Co (a)

June 2008 Answers

When assessing variances it is important to consider the whole picture and the interrelationships that exist. In Chaff there appears to be doubt about the wisdom of some of the decisions that have been made. Favourable variances have been applauded and adverse variances criticised and the managers in charge dispute the challenge to their actions. Purchasing manager. The purchasing manager has clearly bought a cheaper product, saving $48,000. The cause of this is not specified and it could be due to good buying or negotiation, reductions in quality or changes in overall market conditions. We are told the market for buying
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However one could argue that this wage increase has had a motivational effect on the labour force. The labour efficiency variance is $18,000 favourable; and so it is possible that a wage rise has encouraged the labour force to work harder. Academic evidence suggests that this effect might only be temporary as workers get used to the new level of wages. Equally the amount of idle time has reduced considerably, with a favourable variance of $12,000 resulting. Again it is possible that the better motivated labour force has been more willing to work than before. Idle time can have many causes, including, material shortages or machine breakdowns. However, we are told the machines are running well and the buyer has bought enough rice seeds. In conclusion the increase in the wage rate did cost more money but it may have improved morale and enhanced productivity. The total of the three variances above is $15,000* Fav. *($18,000 + $12,000 – $15,000) Maintenance manager. The maintenance manager has decided to delay the annual maintenance of the machines and this has saved $8,000. This will increase profits in the short term but could have disastrous consequences later. In this case only time will tell. If the machines breakdown before the next maintenance then lost production and sales could result. The maintenance manager has only delayed the spend and not prevented it altogether. A saving of $8,000 as suggested by the variance has not been made. It is also

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