QUESTION 2 of Dec 2018 Lantera Creative Son Bho (LCSB) operates a residential landscaping business in an affluent suburb of Kota Kemuning. In an effort to provide quality services, the company concentrated solely on the design and installation of upscale landscaping plan (e.g. trees, shrubs, fountains and lighting), With the clients continually requesting additional services, LCSB has recently expanded into lawn maintenance, including fertilization. The following data relates to the company first year's experience in 2017 with 55 fertilization clients: . Each client requested six (6) fertilization applications services throughout the year and was billed RM40 per application. Each fertilization service used two types of fertilizer coded as Type I and Type II. Type | fertilizer contains a special ingredient for weed control. LCSB purchased 5,000 kilograms of Type | fertilizer at RM0.53 per kilogram and 10,000 kilogram of Type II fertilizer at RMO.40 per kilogram. Actual fertilizer used amounted to 3,600 kg of Type I and 7,800 kg of Type II. A new part time employee was hired to spread the fertilizer. LCSB had to pay wages of RM11,50 per hour because of a very tight labour market; the employee logged a total of 165 hours at clients' residences. Additional Information: 1 . Based on previous experience of the operation, articles reading in trade journals and conversations with other landscapers, the manager of LCSB established the following standard cost cards: Fertilizer purchase price per kg Type I: RMO.50 Type II: RMO.42 Fertilizer usage per application Type I: 15 kgs Type II: 25 kgs Typical hourly wage rate of landscape personnel RM9 Labour time per fertilization application service 40 minutes During the period, due to short supply of Type II fertilizer in the market, the price increased by RM0.20 per kg. The company plans to reduce the usage of Type | fertilizer to 10 kg per application. In order to cope with new skills requirement, LCSB increased labour hour to 45 minutes. The company also has increased wages rate per hour by 15% to encourage productivity. Required: a. Briefly explain any three (3) benefits of segregating the variances into planning and operating elements. (5 marks) b. Compute the following variances: Material mix variance for Type I fertilizer Material usage operating variance for Type I fertilizer ili. Material price planning variance for Type II fertilizer iv. Labour rate planning variance V . Labour efficiency operating variance (10 marks) (Total: 15 marks)
