Question 1 Cleanz SG is a housekeeping service provider in Singapore. Besides home cleaning and ironing, the company also provides cleaning and maintenance services for upholstery, carpet and curtain. Cleanz SG is renowned for its skilled and well trained staff. All service crews are required to go through rigorous background checks, aptitude tests and 20 hours of training to ensure reliability and quality of services. The company has consistently serviced affluent clientele across Singapore, including many in Sentosa Cove and Holland Village and some luxury yachts transiting through Singapore water. Last year, Peh Yong Sin, the general manager of Cleanz SG, introduced a new service to its clients: air-con servicing which covers chemical overhaul and chemical wash. Question 1 (continued) For chemical overhaul, the entire air-con unit has to be dismantled and each air-con component is chemically treated using Grade A chemical to remove algae and rust and filters are disinfected. For chemical wash, internal fan and cooling coil are washed using Grade B chemical to remove buildup and filters are flushed. Sunny Ho, the finance manager of Cleanz SG, estimated the following: Purchase price of chemical per kilogram Chemical usage per air-con servicing Grade A $1.30 30 kg Grade B $0.80 30 kg Labor rate per hour Labor hour per air-con servicing Chemical Overhaul $36.00 45 minutes Chemical Wash $36.00 45 minutes Cleanz SG provided air-con servicing to 70 clients last year. Each client required 12 air-con servicing during the year and was charged $120 for each air-con servicing. Four of the air-con servicing for each client involved chemical overhaul and the remaining eight air-con servicing involved chemical wash. Cleanz SG purchased 9,000 kilograms of Grade A chemical at $1.40 per kilogram and 18,000 kilograms of Grade B chemical at $0.70. Actual usage amounted to 6,400 kilograms and 11,800 kilograms respectively. Sunny paid $42.00 per hour to hire a new crew Bobby Lim. While Bobby is certified by WSO (Workforce Skills Qualification), he has less than one year of working experience in air-con servicing. Bobby worked a total of 505 hours during the year. Unfortunately, this new service did not go smoothly. There were numerous customer complaints and Yong Sin is now considering to discontinue the service next year. Required (All workings should be detailed and clearly presented.) (a) From the financial perspective, is the new service a success? Support your position with clear workings and concise arguments. (5 marks) (b) Calculate the direct material variances. (8 marks) (c) Calculate the direct labour variances. (4 marks) (d) Refer to (b) and (c). From the cost-control perspective, is the new service a success? Discuss. Support your position with clear workings and concise arguments. (7 marks) (e) Refer to (b) and (c). What seems to have happened that give rise to customer complaints? Discuss (6 marks) (TOTAL: 30 marks) Question 1 Cleanz SG is a housekeeping service provider in Singapore. Besides home cleaning and ironing, the company also provides cleaning and maintenance services for upholstery, carpet and curtain. Cleanz SG is renowned for its skilled and well trained staff. All service crews are required to go through rigorous background checks, aptitude tests and 20 hours of training to ensure reliability and quality of services. The company has consistently serviced affluent clientele across Singapore, including many in Sentosa Cove and Holland Village and some luxury yachts transiting through Singapore water. Last year, Peh Yong Sin, the general manager of Cleanz SG, introduced a new service to its clients: air-con servicing which covers chemical overhaul and chemical wash. Question 1 (continued) For chemical overhaul, the entire air-con unit has to be dismantled and each air-con component is chemically treated using Grade A chemical to remove algae and rust and filters are disinfected. For chemical wash, internal fan and cooling coil are washed using Grade B chemical to remove buildup and filters are flushed. Sunny Ho, the finance manager of Cleanz SG, estimated the following: Purchase price of chemical per kilogram Chemical usage per air-con servicing Grade A $1.30 30 kg Grade B $0.80 30 kg Labor rate per hour Labor hour per air-con servicing Chemical Overhaul $36.00 45 minutes Chemical Wash $36.00 45 minutes Cleanz SG provided air-con servicing to 70 clients last year. Each client required 12 air-con servicing during the year and was charged $120 for each air-con servicing. Four of the air-con servicing for each client involved chemical overhaul and the remaining eight air-con servicing involved chemical wash. Cleanz SG purchased 9,000 kilograms of Grade A chemical at $1.40 per kilogram and 18,000 kilograms of Grade B chemical at $0.70. Actual usage amounted to 6,400 kilograms and 11,800 kilograms respectively. Sunny paid $42.00 per hour to hire a new crew Bobby Lim. While Bobby is certified by WSO (Workforce Skills Qualification), he has less than one year of working experience in air-con servicing. Bobby worked a total of 505 hours during the year. Unfortunately, this new service did not go smoothly. There were numerous customer complaints and Yong Sin is now considering to discontinue the service next year. Required (All workings should be detailed and clearly presented.) (a) From the financial perspective, is the new service a success? Support your position with clear workings and concise arguments. (5 marks) (b) Calculate the direct material variances. (8 marks) (c) Calculate the direct labour variances. (4 marks) (d) Refer to (b) and (c). From the cost-control perspective, is the new service a success? Discuss. Support your position with clear workings and concise arguments. (7 marks) (e) Refer to (b) and (c). What seems to have happened that give rise to customer complaints? Discuss (6 marks) (TOTAL: 30 marks)
