Question

The St. Lucia Blood Bank, a private charity partly supported by government grants, is located on...

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 very 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 $ 7,938 $ 6,510 $ 1,428 U
Lab tests 4,973 4,788 185 U
Equipment depreciation 3,640 3,300 340 U
Rent 1,400 1,400 0
Utilities 786 700 86 U
Administration 12,064 11,534 530 U
Total expense $ 30,801 $ 28,232 $ 2,569 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 $15.50q
Lab tests $11.40q
Equipment depreciation $3,300
Rent $1,400
Utilities $700
Administration $10,400 + $2.70q

  
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.)

Homework Answers

Answer #1
Actual results Spending variances Flexible Budget Activity variances Planning Budget
Liters of blood collected 540 540 420
Medical supplies 7938 432 F 8370 1860 U 6510
Lab tests 4973 1183 F 6156 1368 U 4788
Equipment depreciation 3640 340 U 3300 0 None 3300
Rent 1400 0 None 1400 0 None 1400
Utilities 786 86 U 700 0 None 700
Administration 12064 206 U 11858 324 U 11534
Total expense 30801 983 F 31784 3552 U 28232
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