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 Results		Planning Budget		Variances
Liters of blood collected		520		400
Medical supplies	$	8,040	$	6,600	$	1,440	U
Lab tests		4,904		4,720		184	U
Equipment depreciation		3,850		3,500		350	U
Rent		1,500		1,500		0
Utilities		840		750		90	U
Administration		12,200		11,660		540	U
Total expense	$	31,334	$	28,730	$	2,604	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	$16.50q
Lab tests	$11.80q
Equipment depreciation	$3,500
Rent	$1,500
Utilities	$750
Administration	$10,500 + $2.90q

  
Required:

1.Complete the flexible budget performance report for September. (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.)

Answer 1

	Flexible Budget Performance Report
	Planning Budget	Per unit
Liters of blood	400
Medical Supplies	6600	16.5
Lab Tests	4720	11.8
Equipment Depreciation	3500	Fixed
Rent	1500	Fixed
Utilities	750	Fixed
Administration	11660	Semi Variable- Variable $2.9, fixed $10500
Total Expenses	28730

	Flexible Budget Performance Report for the month of September
	Planning Budget		Actual Results	Variance
Liters of blood		520 units	520
Medical Supplies	$16.5 per unit	8580	8040	540	F
Lab Tests	$11.8 per unit	6136	4904	1232	F
Equipment Depreciation	Fixed	3500	3850	-350	U
Rent	Fixed	1500	1500	0	None
Utilities	Fixed	750	840	-90	U
Admininstration	$10,500 + $2.90 per unit	12008	12200	-192	U
Total Expenses		32474	31334	1140	F

Overall we can see that the results for the month have been favorable. there is favorable variance of $1140 in aggregate.