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	$	10,280	$	8,120	$	2,160	U
Lab tests		12,285		10,115		2,170	U
Equipment depreciation		1,440		1,200		240	U
Rent		1,000		1,000		0
Utilities		314		280		34	U
Administration		14,665		14,500		165	U
Total expense	$	39,984	$	35,215	$	4,769	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	$11.60q
Lab tests	$14.45q
Equipment depreciation	$1,200
Rent	$1,000
Utilities	$280
Administration	$13,100 + $2.00q

Answer 1

	Actual results	Spending variances		Flexible Budget	Activity variances		Planning Budget
Liters of blood collected	880			880			700
Medical supplies	10280	72	U	10208	2088	U	8120
Lab tests	12285	431	F	12716	2601	U	10115
Equipment depreciation	1440	240	U	1200	0	None	1200
Rent	1000	0	None	1000	0	None	1000
Utilities	314	34	U	280	0	None	280
Administration	14665	195	F	14860	360	U	14500
Total expense	39984	280	F	40264	5049	U	35215