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		590		470
Medical supplies	$	10,575	$	8,695	$	1,880	U
Lab tests		6,157		5,922		235	U
Equipment depreciation		4,270		3,900		370	U
Rent		1,700		1,700		0
Utilities		948		850		98	U
Administration		12,811		12,251		560	U
Total expense	$	36,461	$	33,318	$	3,143	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	$18.50q
Lab tests	$12.60q
Equipment depreciation	$3,900
Rent	$1,700
Utilities	$850
Administration	$10,700 + $3.30q

  
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

St. Lucia Blood bank
Flexible Budget Performance Report
For the month ended September 30
	Actual Results	Revenue and Spending Variance		Flexible Budget	Activity Variance		Planning Budget
Litres of Blood Collected	590			590			470
Medical Supplies	10,575	340	F	10,915	2,220	U	8,695
Lab Tests	6,157	1,277	F	7,434	1,512	U	5,922
Equipment Depreciation	4,270	370	U	3,900	-	None	3,900
Rent	1,700	-	None	1,700	-	None	1,700
Utilities	948	98	U	850	-	None	850
Administrative Expense	12,811	164	U	12,647	396	U	12,251
Total Expense	36,461	985	F	37,446	4,128	U	33,318