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 52 fertilization clients Each client required nine applications throughout the year and was billed $43 00 per application Three applications involved Type I fertilizer, which contains a special ingredient for weed control The remaining six applications involved Type II fertilizer Sal purchased 6,500 pounds of Type I fertilizer at $0 52 per pound and 11,500 pounds of Type II fertilizer at $0 42 per pound Actual usage amounted to 4,850 pounds of Type I and 8,550 pounds of Type II A new, part time employee was hired to spread the fertilizer Sal had to pay premium wages of $13 00 per hour because of a very tight labor market the employee logged a total of 195 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 65 Type II, $0 43 Fertilizer usage 55 pounds per application Typical hourly wage rate of landscape personnel $9 40 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 Sals 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 Sals new lawn fertilization service 4 On the basis of the variances that you 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

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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 52 fertilization clients:

Each client required nine applications throughout the year and was billed $43.00 per application.
Three applications involved Type I fertilizer, which contains a special ingredient for weed control. The remaining six applications involved Type II fertilizer.
Sal purchased 6,500 pounds of Type I fertilizer at $0.52 per pound and 11,500 pounds of Type II fertilizer at $0.42 per pound. Actual usage amounted to 4,850 pounds of Type I and 8,550 pounds of Type II.
A new, part-time employee was hired to spread the fertilizer. Sal had to pay premium wages of $13.00 per hour because of a very tight labor market; the employee logged a total of 195 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, $0.65; Type II, $0.43
Fertilizer usage: 55 pounds per application
Typical hourly wage rate of landscape personnel: $9.40
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 Sals 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 Sals new lawn fertilization service.
4. On the basis of the variances that you 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?