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	$	10,437	$	8,295	$	2,142	U
Lab tests		12,145		9,975		2,170	U
Equipment depreciation		1,840		1,600		240	U
Rent		1,700		1,700		0
Utilities		384		350		34	U
Administration		14,705		14,520		185	U
Total expense	$	41,211	$	36,440	$	4,771	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	$11.85q
Lab tests	$14.25q
Equipment depreciation	$1,600
Rent	$1,700
Utilities	$350
Administration	$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.)

	St. Lucia Blood Bank Flexible Budget Performance Report For the Month Ended September 30 Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Medical supplies $10,437 $8,295 Lab tests 12,145 9,975 Equipment depreciation 1,840 1,600 Rent 1,700 1,700 Utilities 384 350 Administration 14,705 14,520 Total expense $41,211 $36,440

Answer 1

St. Lucia Blood Bank
Flexible Budget Performance Report
For the Month Ended September 30
	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Medical supplies	$10,437	$9	U	$10,428	$2,133	U	$8,295
Lab tests	$12,145	$395	F	$12,540	$2,565	U	$9,975
Equipment depreciation	$1,840	$240	U	$1,600	$0	N	$1,600
Rent	$1,700	$0	N	$1,700	$0	N	$1,700
Utilities	$384	$34	U	$350	$0	N	$350
Administration	$14,705	$103	F	$14,808	$288	U	$14,520
Total expense	$41,211	$215	F	$41,426	$4,986	U	$36,440

--Working for Flexible Budget

	Flexible Budget
Medical supplies	=880*11.85
Lab tests	=880*14.25
Equipment depreciation	1600
Rent	1700
Utilities	350
Administration	=(880*1.6)+13400
Total expense