1. George Siam runs a landscaping business in a wealthy suburb of Wellington. He provides high-quality service and focuses on the design and installation of top of the market landscaping plans that include fountains, trees, paving, lighting and exotic plants. However, his clients are continually requesting new services. Therefore, he has recently introduced a range of lawn maintenance services, including fertilisation. The following data relates to the first year of his landscaping service when he serviced 55 clients. Each client needed six applications of fertiliser during the year and was charged GH4 for each application. For each client, two applications involve Grade A fertiliser, which contains a special ingredient for weed control. The remaining four applications are with Grade B fertiliser. Based on prior knowledge

of the operation and after advice from other landscapersGeorge estimated the following

• Typical wage rate per employee GH27 per hour.
• Labour time per application of fertiliser 4 minutes.
• Purchase price of fertiliser per kilogram: Grade A, GH0.50 andGrade B, GH0.42.
• Fertiliser usage 4 kilograms per application.

George purchased 5,000 kilograms of Grade A fertiliser at GH0.53 per kilogram and 10,000 kilograms of Grade B fertiliser at GH0.40 per kilogram. Actual usage amounted to 3,700 and 7,800 kilograms respectively. A new part-time employee, Fred, was hired to spread the fertiliser. George found he had to pay Fred GH34.50 per hour due to the very tight market for fertiliser specialists, and Fred worked a total of 165 hours during the year. Unfortunately, Georges new service did not go smoothly, and customers complaints were much higher than expected.

Required:

1. Calculate the direct material variances for each type of fertiliser.
2. Calculate direct labour variances.
3. Calculate the total actual cost of the new service. Was it a financial success? Explain.
4. Consider the variances that you calculated in requirements 1 and 2.
   1. Was the new service a success from an overall cost-control perspective?
   2. What seems to have happened that gave rise to customer complaints?
5. Given the complaints, should the fertiliser service continue to be offered next year? Why?