Christopher Jordan, CEO of South Keys Hospital was meeting with the lab administrator over the results of the current year. The CEO was curious about the current year results, given that the lab had decided to outsource their supplies from an internet site that another hospital administrator, Therese had endorsed. The hope was that direct sourcing would save the hospital time and money. The CEO has asked you to determine whether or not it has resulted in savings.

The information before them included the following related to blood tests. The lab performed

blood tests during the period. They had purchased and used glass plates to perform

the tests at a cost of $ During the month labour hours were incurred by the lab

technicians working in the laboratory with a total Cost of $

The hospital had developed standard for the testing as follows for doing one blood test:

glass plates per test at $ per glass plate $

labour hours at $ per hour $

Total cost per test $

Required:

a Compute the price and efficiency variances for both direct material and direct labour for the

lab tests marks

b Respond to the CEO regarding whether they should continue to use the internet purchasing

site. Support your analysis with the results in part a and any other information you think might

be relevant to the discussion? marksbe brief