Question

A small local blood bank has been trying to support the needs of the community, and has processed over 20% more blood than had been originally planned for the month. The following is a cost control report.

Blood Bank

Cost Performance Report

For the mont ended April 20XX

......................................................... Actual --- Budget --- Variance

Liters of Blood Collected....................480 --- 400 --- 80

Variable Costs:

------------------------Medical Supplies...$8,500 --- $8,000 --- $500

-----------------------Lab Tests ................$6,800 --- $6,000 --- $800

----------- Refreshment for Donors ....... $1,200 --- $1,100 --- $100

-------------Administrative Supplies .......... $500 --- $400 ---- $100

-------------------------Total Variable Costs $17,000 --- $15,500 --- $1,500

Fixed Costs:

----------------------------------- Staff Salaries $10,000 --- $10,000 --- 0

-----------------------Equipment Depreciation $2,800 --- $2,770 --- $30 Unfavorable

------------------------------------------------Rent $1,000 --- $1,000 --- 0

------------------------------------------Insurance $550 --- $530 --- $20 Unfavorable

----------------------------------Total Fixed Costs $14,350 --- $14,300 --- $50 Unfavorable

----------------------------------------- Total Cost $31,350 --- $29,800 --- $1550 Unfavorable

The managing director of the blood bank was very unhappy with this report, claiming that his costs were higher than expected due to the emergencies in the community. The managing director has heard that you just finished a course that discussed flexible budgets. He has asked you to assist him in developing a flexible budget that will show his superiors that he has controlled costs in most areas.

1. Prepare a revised budget for April using the flexile performance approach. Show calculations of how you found the variance. You must designate a variance for each cost category and for the total cost: Unfavorable or Favorable. The variable and fixed cost labeling has been set so do not change the labeling.

2. Comment on how you developed this revised report and what it means.

3. Identity variances in the report you prepared that should be investigated. Explain why these should be investigated.

Blood Bank

Revised Cost Performance Report

For the month ending in April 20XX

.............................................................. Actual --- Budget --- Variance ..... Unfavorable or Favorable

Liters of Blood Collected ______________________________________________________________

Variable Costs:

.................... Medical Supplies __________________________________________________________

......................Lab Tests ________________________________________________________________

.....................Refreshment for donors ______________________________________________________

..................... Administrative Supplies ______________________________________________________

......................................Total Variable Costs: ________________________________________________

Fixed CostsL

.........................................Staff Salaries _____________________________________________________

.......................................... Equipment Depreciation ___________________________________________

...................................................Rent _______________________________________________________

...............................................Insurance _____________________________________________________

.................................................................Total FIxed Costs _____________________________________

TOTAL COST ......................................_________________________________________________________

Answer 1