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 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		610		490
Medical supplies	$	10,437	$	8,575	$	1,862	U
Lab tests		6,213		5,978		235	U
Equipment depreciation		4,060		3,700		360	U
Rent		1,600		1,600		0
Utilities		894		800		94	U
Administration		12,669		12,119		550	U
Total expense	$	35,873	$	32,772	$	3,101	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	$17.50q
Lab tests	$12.20q
Equipment depreciation	$3,700
Rent	$1,600
Utilities	$800
Administration	$10,600 + $3.10q

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.)

St. Lucia Blood Bank Flexible Budget Performance Report For the Month Ended September 30 Flexible oleſ Budget Actual Results 610 Planning Budget 490 Liters of blood collected Medical supplies $ 10,437 8,575 Lab tests 6,213 5,978 Equipment depreciation 4,060 3,700 Rent 1,600 1,600 Utilities 894 800 Administration 12,669 35,873 12,119 32,772 Total expense $ $

Answer 1

Answer

• Requirement 1

	Actual Results	Spending Variance		Flexible Budget	Activity variance		Planning Budget
Litres of blood collected (q)	610			610			490
Medical Supplies	$               10,437.00	$             238.00	F	$             10,675.00	$            2,100.00	U	$             8,575.00
Lab Tests	$                 6,213.00	$         1,229.00	F	$               7,442.00	$            1,464.00	U	$             5,978.00
Equipment depreciation	$                 4,060.00	$             360.00	U	$               3,700.00	$                         -	None	$             3,700.00
Rent	$                 1,600.00	$                      -	None	$               1,600.00	$                         -	None	$             1,600.00
Utilities	$                     894.00	$               94.00	U	$                   800.00	$                         -	None	$                800.00
Administrative	$               12,669.00	$             178.00	U	$             12,491.00	$                372.00	U	$          12,119.00
Total Expenses	$               35,873.00	$             835.00	U	$             36,708.00	$            3,936.00	U	$          32,772.00

--Working

							Flexible Budget	Planning Budget
Litres of blood collected (q)							610	490
Medical Supplies	(	$                      -	)	$    17.50	610 or 490		$             10,675.00	$             8,575.00
Lab Tests	(	$                      -	+	$    12.20	610 or 490	)	$               7,442.00	$             5,978.00
Equipment depreciation	(	$         3,700.00	+		610 or 490	)	$               3,700.00	$             3,700.00
Rent	(	$         1,600.00	+	$           -	610 or 490	)	$               1,600.00	$             1,600.00
Utilities	(	$            800.00	)	$           -	610 or 490		$                   800.00	$                800.00
Administrative	(	$      10,600.00	+	$      3.10	610 or 490	)	$             12,491.00	$          12,119.00
Total Expenses							$             36,708.00	$          32,772.00