Question 1. Did Suture Self's cost saving effort for the Direct Material result in favorable or unfavorable price variance?

A. Favorable

B. Unfavorable

C. Neither (i.e. variance = 0)

Question 2. How much did the cost saving measures in March save (or cost) in Direct Materials? (Hint: this is the price variance)

Suture Self is a health care service firm which provides health care services and education. In January of 2017, Mrs. Terry, a philanthropist, paid for all of Suture Self's rent for the year, which had previously been their only fixed cost (i.e. FOH is ignored in this question. Yay.). In order to demonstrate all the karma Mrs. Terry had garnered, Suture Self started tracking their costs in order to observe and hopefully improve their operations. In February (which has 28 days, for the record), the 10 full time employees recorded the following costs per day: Costs and activity in February Cost per day Direct materials (gauze, sutures, etc.) @ 250$/patient $50,000 / day Number of patients 200 patients / day Direct Labor ($20 /hour @ 80 hrs/day) $1,600 / day Variable Overhead (how-to-sew pamphlets, etc.) @ $50 / patient $10,000 / day In March (which has 31 days, again for the record), the employees decided to implement some cost saving efforts, by trying to convince their patients to use more generic drugs, which they believed would reduce their material costs. In general they felt like their efforts were successful. Also in March, one of the employees fell sick and had to miss work, causing some of the other employees to fill in and charge overtime. This was concerning to them, as they worried this labor overage would end up undoing all their material-cost-saving efforts. So, with chagrin, they closed their books for the month of March, and recorded the following total costs: Costs and activity in March Total cost for March Direct materials $1,500,000 Number of patients 6200 patients Direct Labor $55,000 Total Direct Labor Hours 2500 hours Variable Overhead $321,000 Suture Self uses absorption actual costing (not that it matters here), and allocates variable overhead on the basis of number of patients (same as as Direct Materials). For the following questions, variances should be calculated comparing March's Actual numbers to February. Hint: think of days as the 'units' under consideration in the variance analysis