Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sal Amato operates a residential landscaping business in an affluent suburb of St. Louis. In an effort to provide quality service, he has concentrated solely

Sal Amato operates a residential landscaping business in an affluent suburb of St. Louis. In an effort to provide quality service, he has concentrated solely on the design and installation of upscale landscaping plans (e.g., trees, shrubs, fountains, and lighting). With his clients continually requesting additional services, Sal recently expanded into lawn maintenance, including fertilization. The following data relate to his first years experience with 57 fertilization clients: Each client required six applications throughout the year and was billed $42.00 per application. Two applications involved Type I fertilizer, which contains a special ingredient for weed control. The remaining four applications involved Type II fertilizer. Sal purchased 5,200 pounds of Type I fertilizer at $0.55 per pound and 10,200 pounds of Type II fertilizer at $0.42 per pound. Actual usage amounted to 3,400 pounds of Type I and 7,900 pounds of Type II. A new, part-time employee was hired to spread the fertilizer. Sal had to pay premium wages of $11.70 per hour because of a very tight labor market; the employee logged a total of 169 hours at client residences. Based on previous knowledge of the operation, articles in trade journals, and conversations with other landscapers, Sal established the following standards: Fertilizer purchase price per pound: Type I, $0.52; Type II, $0.44 Fertilizer usage: 42 pounds per application Typical hourly wage rate of landscape personnel: $9.20 Labor time per application: 40 minutes The operation did not go as smoothly as planned, with customer complaints actually much higher than expected. Required: 1. Compute Sal's direct-material variances for each type of fertilizer. 2. compute the direct-labor variances. 3-a Compute the actual cost of the client applications. (Note: Exclude any fertilizer in inventory, as remaining fertilizer can be used next year.) 3-b Calculate the profit or loss of Sal's new lawn fertilization service. 4 on the basis of the variances that computed in parts (1) and (2) was the new service a success from an overall cost-control perspective? 5. Should the fertilizer service be continued next year?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

b. Why were these values considered important?

Answered: 1 week ago