SpringFresh provides commercial laundry and linen services to local hospitals, hotels, and restaurants. SpringFresh charges its customers $1.50 per pound laundered, regardless of the items to-be cleaned (e.g., sheet, towel, garment, tablecloth).

SpringFresh budgets to launder 70,000 pounds each month and, for each pound laundered, budgets to spend $0.10 on materials and $0.40 cents on labor. For the most recent month, SpringFresh actually laundered 60,000 pounds and spent $4,000 on materials and $20,000 on labor.

Required:

a. Calculate the materials and labor flexible budget variances for the most recent month.

b. In the absence of any other information, does it appear that SpringFresh’s management has done a good job controlling costs in the most recent month?

c. Assume that in recent months, SpringFresh has received numerous complaints about the quality of their services. Specifically, several customers have complained that their laundry is “not as clean as it used to be” and, even worse, that some of their items have come back stained due to bleeding. Does this information cast the favorable variances and management’s performance in a different light?