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	$	10,369	$	8,225	$	2,144	U
Lab tests		12,262		10,080		2,182	U
Equipment depreciation		1,770		1,500		270	U
Rent		1,600		1,600		0
Utilities		316		290		26	U
Administration		13,990		13,850		140	U
Total expense	$	40,307	$	35,545	$	4,762	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:

Medical supplies	$11.75q
Lab tests	$14.40q
Equipment depreciation	$1,500
Rent	$1,600
Utilities	$290
Administration	$12,800 + $1.50q

  

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

1) Complete the performance report for September using the flexible budget approach

	Actual results	Spending variance	Flexible budget	Activity variance	Static budget
Liters of blood collected	880		880		770
Medical supplies	10369	29 U	10340	2115 U	8225
Lab test	12262	410 F	12672	2592 U	10080
Equipment depreciation	1770	270 U	1500	0 None	1500
Rent	1600	0 None	1600	0 None	1600
Utilities	316	26 U	290	0 None	290
Administration	13990	130 F	14120	270 U	13850
Total expense	40307	215 F	40522	4977 U	35545