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		540		420
Medical supplies	$	10,710	$	8,820	$	1,890	U
Lab tests		5,943		5,712		231	U
Equipment depreciation		4,795		4,400		395	U
Rent		1,950		1,950		0
Utilities		1,083		975		108	U
Administration		13,131		12,546		585	U
Total expense	$	37,612	$	34,403	$	3,209	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	$21.00q
Lab tests	$13.60q
Equipment depreciation	$4,400
Rent	$1,950
Utilities	$975
Administration	$10,950 + $3.80q

  
Required:

1.Complete the flexible budget performance report for September. (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.)

Answer 1

	Actual Results	Spending variances		Flexible budget	Activity variances		Planning budget
Liters of blood collected	540			540			420
Medical supplies	10710	630	F	11340	2520	U	8820
Lab tests	5943	1401	F	7344	1632	U	5712
Equipment depreciation	4795	395	U	4400	0	None	4400
Rent	1950	0	None	1950	0	None	1950
Utilities	1083	108	U	975	0	None	975
Administration	13131	129	U	13002	456	U	12546
Total expense	37612	1399	F	39011	4608	U	34403