Santa Rosa Industries uses a standard-costing system to assist in the evaluation of operations. The company has had considerable trouble in recent months with suppliers and employees, so much so that management hired a new production supervisor, Frank Schmidt. The new supervisor has been on the job for five months and has seemingly brought order to an otherwise chaotic situation. The vice president of manufacturing recently commented that "... Schmidt has really done the trick. The change to a new direct- material supplier and Schmidt's team-building/morale-boosting training exercises have truly brought things under control." The VP's comments were based on both a plant tour, where he observed a contented workforce, and a review of the following data, which was excerpted from a performance report: Direct-material variances Direct-labor variances $6,220 Favorable $5,690 Favorable These variances are especially outstanding, given that the amounts are favorable and small. (Santa Rosa's budgeted material and labor costs generally each average about $358,000 for similar periods.) Additional data follow. The company purchased and consumed 45,800 pounds of direct materials at $8.50 per pound, and paid $17.30 per hour for 21,700 direct-labor hours of activity. Total completed production amounted to 10,300 units. A review of the firm's standard cost records found that each completed unit requires 4.0 pounds of direct material at $9.60 per pound and 2.5 direct-labor hours at $14.80 per hour. Required: 1. On the basis of the information contained in the performance report, should Santa Rosa be concerned about its variances? 2-a. Calculate the company's direct-material variances. 2-b. Calculate the company's direct-labor variances. 3. On the basis of your answers to requirement (2), should Santa Rosa be concerned about its variances? 4. Are things going as smoothly as the vice president believes? 5. Is it possible that some of the company's current problems lie outside Schmidt's area of responsibility? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 3 Req 4 Req 5 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 year's 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 6,400 pounds of Type I fertilizer at $0.51 per pound and 11,400 pounds of Type Il fertilizer at $0.41 per pound. Actual usage amounted to 5,110 pounds of Type I and 8,500 pounds of Type II. A new, part-time employee was hired to spread the fertilizer. Sal had to pay premium wages of $12.90 per hour because of a very tight labor market; the employee logged a total of 193 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 1, $0.64; Type II, $0.42 Fertilizer usage: 54 pounds per application Typical hourly wage rate of landscape personnel: $9.30 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 of 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 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