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		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.)

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