Question

The St. Lucia Blood Bank, a private charity partly supported by government grants, is located on the Caribbean island of St. Lucia. The blood bank has just finished its operations for September, which was a particularly busy month due to a powerful hurricane that hit neighboring islands causing many injuries. The hurricane largely bypassed St. Lucia, but residents of St. Lucia willingly donated their blood to help people on other islands. As a consequence, the blood bank collected and processed over 20% more blood than had been originally planned for the month. A report prepared by a government official comparing actual costs to budgeted costs for the blood bank appears below. Continued support from the government depends on the blood bank’s ability to demonstrate control over its costs. St. Lucia Blood Bank Cost Control Report For the Month Ended September 30 Actual Results Planning Budget Variances Liters of blood collected 880 700 Medical supplies $ 10,274 $ 8,120 $ 2,154 U Lab tests 12,233 10,045 2,188 U Equipment depreciation 2,300 2,000 300 U Rent 1,200 1,200 0 Utilities 322 290 32 U Administration 14,240 14,060 180 U Total expense $ 40,569 $ 35,715 $ 4,854 U The managing director of the blood bank was very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighboring islands. He also pointed out that the additional costs had been fully covered by payments from grateful recipients on the other islands. The government official who prepared the report countered that all of the figures had been submitted by the blood bank to the government; he was just pointing out that actual costs were a lot higher than promised in the budget. The following cost formulas were used to construct the planning budget: Cost Formulas Medical supplies $11.60q Lab tests $14.35q Equipment depreciation $2,000 Rent $1,200 Utilities $290 Administration $12,800 + $1.80q Required: 1. Complete the performance report for September using the flexible budget approach. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

Answer 1

	Actual results	Spending variances		Flexible Budget	Activity variances		Planning Budget
Liters of blood collected	880			880			700
Medical supplies	10274	66	U	10208	2088	U	8120
Lab tests	12233	395	F	12628	2583	U	10045
Equipment depreciation	2300	300	U	2000	0	None	2000
Rent	1200	0	None	1200	0	None	1200
Utilities	322	32	U	290	0	None	290
Administration	14240	144	F	14384	324	U	14060
Total expense	40569	141	F	40710	4995	U	35715