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 Planning Results Budget Liters of blood collected 530 Variances 410 Medical supplies Lab tests Equipment depreciation Rent Utilities Administration Total expense 7,995 4,941 3,745 1.450 813 12,133 31,077 $ 6,560 4,756 3,400 1,450 725 11,598 $ 28,489 $ 1,435 U 185 U 345 U 0 88 U 535 U $ 2,588 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 Lab tests Equipment depreciation Rent Utilities Administration Cost Formulas $16.009 $11.609 $3,400 $1,450 $725 $10,450 + $2.809

Answer 1

Flexible budget performance

	Actual	Spending variance	Flexible budget	activity variance	Planning budget
Liters of blood collected	530		530		410
Medical supplies	7995	485 F	8480	1920 U	6560
Lab test	4941	1207 F	6148	1392 U	4756
Equipment depreciation	3745	345 U	3400	0 None	3400
Rent	1450	0 None	1450	0 None	1450
Utilities	813	88 U	725	0 None	725
Administration	12133	199 U	11934	336 U	11598
Total expense	31077	1060 U	32137	3648 U	28489