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3. 6 James is a sports groundsman. After several years working for employers, he has decided to start his own business. For six months each year from April to September, he plans to work on the maintenance of cricket grounds. He intends to work 170 hours per month during the six-month season. The work falls into three types, Outfield Maintenance, Maintenance of the cricket "square" and Pitch Preparation for specific matches. James has calculated the variable material costs and time taken for each type of work as follows of: Variable material cost Time taken Outfield Maintenance 10 8 hours Cricket Square Maintenance 8 4 hours Pitch Preparation 2 hours In order to be able to negotiate prices, James decides that for each type of work he will calculate the lowest long-run price he would need charge. To do this, he will charge his own time at 10 per hour. However, he will try to bargain prices that are higher than the lowest price he has calculated. The fixed overheads for insurance, equipment and repairs is estimated as 6,120 for the six-month period and will be charged to each type of work based on James's labour time. After discussions with the local clubs about the work and prices, James agreed the following prices. Price Outfield Maintenance 150 Square Maintenance 80 Pitch Preparation 50 At these prices, James customers have offered him 60 Outfield Maintenances, 120 Square Maintenances and 150 Pitch Preparations during the season. However, he may not be able to do all this work. Required: a) i. Prepare a schedule to show the revenues, costs and profit of each type of work. (2 marks) ii. In view of James' time limitation, provide calculations to advise him of the most financially beneficial mix of work to be undertaken during the six months and the profit he will earn with your advice. (4 marks) b) Prepare a monthly budget for James, assuming that James goes ahead with the work as estimated in part (a ii) and that the work load will be the same each month. (4 marks) In the first month of trading, James actually worked the 170 hours as budgeted, but the work performed was 9 Outfield Maintenances, 18 Square Maintenances and 13 Pitch Preparations. All work paid the agreed prices. This work used up all his working hours. All expenses were as expected for the level of work. Calculate the actual profit for the first month, the contribution volume variance and the contribution mix variance. (8 marks) Briefly explain why the actual net income is different from the budget. (2 marks) 3. 6 James is a sports groundsman. After several years working for employers, he has decided to start his own business. For six months each year from April to September, he plans to work on the maintenance of cricket grounds. He intends to work 170 hours per month during the six-month season. The work falls into three types, Outfield Maintenance, Maintenance of the cricket "square" and Pitch Preparation for specific matches. James has calculated the variable material costs and time taken for each type of work as follows of: Variable material cost Time taken Outfield Maintenance 10 8 hours Cricket Square Maintenance 8 4 hours Pitch Preparation 2 hours In order to be able to negotiate prices, James decides that for each type of work he will calculate the lowest long-run price he would need charge. To do this, he will charge his own time at 10 per hour. However, he will try to bargain prices that are higher than the lowest price he has calculated. The fixed overheads for insurance, equipment and repairs is estimated as 6,120 for the six-month period and will be charged to each type of work based on James's labour time. After discussions with the local clubs about the work and prices, James agreed the following prices. Price Outfield Maintenance 150 Square Maintenance 80 Pitch Preparation 50 At these prices, James customers have offered him 60 Outfield Maintenances, 120 Square Maintenances and 150 Pitch Preparations during the season. However, he may not be able to do all this work. Required: a) i. Prepare a schedule to show the revenues, costs and profit of each type of work. (2 marks) ii. In view of James' time limitation, provide calculations to advise him of the most financially beneficial mix of work to be undertaken during the six months and the profit he will earn with your advice. (4 marks) b) Prepare a monthly budget for James, assuming that James goes ahead with the work as estimated in part (a ii) and that the work load will be the same each month. (4 marks) In the first month of trading, James actually worked the 170 hours as budgeted, but the work performed was 9 Outfield Maintenances, 18 Square Maintenances and 13 Pitch Preparations. All work paid the agreed prices. This work used up all his working hours. All expenses were as expected for the level of work. Calculate the actual profit for the first month, the contribution volume variance and the contribution mix variance. (8 marks) Briefly explain why the actual net income is different from the budget. (2 marks)

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