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 Planning Results Budget. Variances Liters of blood collected 430 $ Medical supplies Lab tests Equipment depreciation 1,892 U 232 U 390 U Rent $ 10,707 5.994 4,69e 1.900 1,056 13,071 $ 37,418 $ 8,815 5,762 4,300 1,909 950 12,491 $ 34,218 Utilities Administration Total expense 106 U 580 U $3,200 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:

Answer 1

Flexible budget performance report

	Actual results	Spending variance	Flexible budget	Activity variance	Planning budget
Liters of blood collected	550		550		430
Medical supplies	10707	568 F	11275	2460 U	8815
Lab tests	5994	1376 F	7370	1608 U	5762
Equipment depreciation	4690	390 U	4300	0 None	4300
Rent	1900	0 None	1900	0 None	1900
Utilities	1056	106 U	950	0 None	950
Administration	13071	136 U	12935	444 U	12491
Total expense	37418	1312 F	38730	4512 U	34218