Maple Cleaning Services (MCS) is a local business in the Tri-cities area. It provides cleaning services to

residential households and commercial establishments. Both households and businesses sign contracts

with MCS. As the contractor, MCS dispatches its crew to the locations. The crew performs the cleaning

as per the contracts and reports back to the company main desk. The main desk then prepares the

invoice and sends them to the clients. Clients have one day to pay the invoice. Sales volume can vary

from one quarter to the next.

In terms of expenses, the main expense for MCS relates to labour. They pay crew members

competitive wages and benefits. The wage rate is calculated on an hourly basis and is fixed for the

entire year.

The next expense item is cleaning supplies. MCS accounts for cleaning supplies relative to the hours

worked. For example, they estimate that cleaning supplies are consumed at a rate of 0.2 litres per

labour hour. This is a good measure because the longer it takes for a site to be cleaned, the more the

consumption of cleaning supplies. Cleaning supplies are procured from a prominent vendor and the cost

is fixed for the entire year.

Sometimes clients are not happy about the cleaning services and register a complaint. In that case, the

crew is dispatched again for a second cleaning. The hours accruing from such scenarios are not billed to

the client as this constitutes a service recovery. However, the crew is paid for such hours. MCS

maintains a record of these hours and classifies them as unproductive hours, or unbilled hours. This is

calculated as a percentage of revenue earning hours (e.g., 10% of revenue generating hours). For this

assignment, assume that there is no consumption of cleaning materials when this second cleaning is

being done.Budget for the year 2022:

The budget for the year 2022 was prepared in December 2021 and had the following components:

Revenue:

The revenue is calculated as number of hours that the crew works on a site, multiplied by the contracted

rate with the client. The hours worked in the residential and commercial segments are shown

separately, and there is a total for the combined hours worked. The revenue for each segment is arrived

at by multiplying the hours for the segment by the rate. The budget is prepared for four quarters, one to

four.

For 2022, the budgeted sales hours were:

Quarter

1

2

3

4

Budgeted commercialsalesin

hours

26,300

27,200

29,100

28,600

Budgeted residential sales in hours 17,500

18,300

16,900

19,800

For 2022, the budgeted selling price per hours were:

Quarter

1

2

3

4

Selling price per hour (commercial)

$44

$44

$44

$44

Selling price per hour (residential)

$47

$47

$47

$47

Direct Labour expense:

MCS will pay its employees an hourly rate of $30 in each of the four quarters of the year.

Cleaning supply usage:

The budgeted usage is 0.35 litre / labour hour for the commercial segment and 0.39 litre/ labour hour

for the residential segment. This is constant for the entire year.

Cleaning supply expense:

Budgeted expense is $6.90 per litre for the entire year