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		780		600
Medical supplies	$	9,166	$	7,020	$	2,146	U
Lab tests		10,754		8,580		2,174	U
Equipment depreciation		1,480		1,200		280	U
Rent		1,700		1,700		0
Utilities		340		310		30	U
Administration		14,015		13,860		155	U
Total expense	$	37,455	$	32,670	$	4,785	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	$11.70q
Lab tests	$14.30q
Equipment depreciation	$1,200
Rent	$1,700
Utilities	$310
Administration	$12,900 + $1.60q

  

Required:

1. Complete the performance report for September using the flexible budget approach. (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. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

Answer 1

	Actual results	Spending variances		Flexible Budget	Activity variances		Planning Budget
Liters of blood collected	780			780			600
Medical supplies	9166	40	U	9126	2106	U	7020
Lab tests	10754	400	F	11154	2574	U	8580
Equipment depreciation	1480	280	U	1200	0	None	1200
Rent	1700	0	None	1700	0	None	1700
Utilities	340	30	U	310	0	None	310
Administration	14015	133	F	14148	288	U	13860
Total expense	37455	183	F	37638	4968	U	32670