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 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 580 460
Medical supplies $ 10,626 $ 8,740 $ 1,886 U
Lab tests 6,123 5,888 235 U
Equipment depreciation 4,375 4,000 375 U
Rent 1,750 1,750 0
Utilities 975 875 100 U
Administration 12,879 12,314 565 U
Total expense $ 36,728 $ 33,567 $ 3,161 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 $19.00q
Lab tests $12.80q
Equipment depreciation $4,000
Rent $1,750
Utilities $875
Administration $10,750 + $3.40q

  
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

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.)

Actual Spending variance Flexible budget Activity variance Static budget
Liters of blood collected 580 580 460
Medical supplies 10626 394 F 11020 2280 U 8740
Lab test 6123 1301 F 7424 1536 U 5888
Equipment depreciation 4375 375 U 4000 0 None 4000
Rent 1750 0 None 1750 0 None 1750
Utilities 975 100 U 875 0 None 875
Administration 12879 157 U 12722 408 U 12314
Total expense 36728 1063 F 37791 4224 U 33567
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