Secure Net Ltd (SN) manufactures security cards that restrict access to government owned buildings around the world. The standard cost for the plastic that goes into making a card is $4 per kg and each card uses 40 g of plastic after an allowance for waste. In November 100,000 cards were produced and sold by SN and this was well above the budgeted sales of 60,000 cards. The actual cost of the plastic was $5.25 per kg and the production manager (who is responsible for all buying and production issues) was asked to explain the increase. He said, World oil price increases pushed up plastic prices by 20% compared to our budget and I also decided to use a different supplier who promised better quality and increased reliability for a slightly higher price. I know we have overspent but not all the increase in plastic prices is my fault. The actual usage of plastic per card was 35 g per card and again the production manager had an explanation. He said, The worldwide standard size for security cards increased by 5% due to a change in the card reader technology, however, our new supplier provided much better quality of plastic and this helped to cut down on the waste.

Total material variances have been calculated into price and components and are as follows: Materials quantity variance: $2,000F Materials price variance: $4,375A SN operates a just-in-time (JIT) system and hence carries very little inventory. Required: (a) Calculate material planning and operational variances for both material price and material quantity. (8 marks) (b) Assess the performance of the production manager. (6 marks)