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		540		420
Medical supplies	$	10,710	$	8,820	$	1,890	U
Lab tests		5,943		5,712		231	U
Equipment depreciation		4,795		4,400		395	U
Rent		1,950		1,950		0
Utilities		1,083		975		108	U
Administration		13,131		12,546		585	U
Total expense	$	37,612	$	34,403	$	3,209	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	$21.00q
Lab tests	$13.60q
Equipment depreciation	$4,400
Rent	$1,950
Utilities	$975
Administration	$10,950 + $3.80q

  
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.)

St. Lucia Blood Bank Flexible Budget Performance Report For the Month Ended September 30 Actual Results Activity Variances Flexible Budget Revenue and Spending Variances Planning Budget Liters of blood collected 540 420 420 Medical supplies $10,710 $1,890 F $8,820 $0 None $8,820 Lab tests 5,943 231 F 5,712 0 None 5,712 Equipment depreciation 4,795 395 F 4,400 0 None 4,400 Rent 1,950 0 None 1,950 0 None 1,950 Utilities 1,083 108 F 975 0 None 975 Administration 13,131 585 F 12,546 0 None 12,546 Total expense $37,612 $3,209 F $34,403 $0 None $34,403

Answer 1

Solution 1:

St. Lucia Blood Bank
Flexible Budget Performance Report
For the month ended September 30
Particulars	Actual results	Flexible Budget Variance		Flexible Budget	Activity Variance		Static Budget
Liters of blood collected	540			540			420
Medical supplies	$10,710.00	$630.00	F	$11,340.00	$2,520.00	U	$8,820.00
Lab tests	$5,943.00	$1,401.00	F	$7,344.00	$1,632.00	U	$5,712.00
Equipment depreciation	$4,795.00	$395.00	U	$4,400.00	$0.00	None	$4,400.00
Rent	$1,950.00	$0.00	None	$1,950.00	$0.00	None	$1,950.00
Utilities	$1,083.00	$108.00	U	$975.00	$0.00	None	$975.00
Administration	$13,131.00	$129.00	U	$13,002.00	$456.00	U	$12,546.00
Total	$37,612.00	$1,399.00	F	$39,011.00	$4,608.00	U	$34,403.00