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		570		450
Medical supplies	$	10,665	$	8,775	$	1,890	U
Lab tests		6,084		5,850		234	U
Equipment depreciation		4,480		4,100		380	U
Rent		1,800		1,800		0
Utilities		1,002		900		102	U
Administration		12,945		12,375		570	U
Total expense	$	36,976	$	33,800	$	3,176	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	$19.50q
Lab tests	$13.00q
Equipment depreciation	$4,100
Rent	$1,800
Utilities	$900
Administration	$10,800 + $3.50q

  
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

St. Lucia Blood Bank Flexible Budget Performance Report For the Month Ended September 30
	Planning Budget	Activity Variances	Flexible Budget	Spending Variances	Actual Result
Liters of blood collected (q)	450		570		570
Medical supplies ($19.50q)	8775	2340 U	11115	450 F	10665
Lab tests ($13.00q)	5850	1560 U	7410	1326 F	6084
Equipment depreciation ($4100)	4100	None	4100	380 U	4480
Rent ($1,800)	1800	None	1800	None	1800
Utilities ($900)	900	None	900	102 U	1002
Administration ($10800+3.50q)	12375	420 U	12795	150 U	12945
Total expense	33800	4320 U	38120	1144 F	36976