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		680		500
Medical supplies	$	7,931	$	5,775	$	2,156	U
Lab tests		9,376		7,200		2,176	U
Equipment depreciation		1,810		1,600		210	U
Rent		1,800		1,800		0
Utilities		372		340		32	U
Administration		14,280		14,100		180	U
Total expense	$	35,569	$	30,815	$	4,754	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	$11.55q
Lab tests	$14.40q
Equipment depreciation	$1,600
Rent	$1,800
Utilities	$340
Administration	$13,200 + $1.80q

  

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.)

Answer 1

• All working forms part of the answer

St. Lucia Blood Bank
Cost Control Report
For the Month Ended September 30
	Flexible Budget	Actual Results	Variances
Liters of blood collected	680	680	0	None
Medical supplies	$              7,854.00 [11.55 x 680]	$              7,931.00	$                   77.00	Unfavourable
Lab tests	$              9,792.00 [14.40 x 680]	$              9,376.00	$                 416.00	Favourable
Equipment depreciation	$              1,600.00	$              1,810.00	$                 210.00	Unfavourable
Rent	$              1,800.00	$              1,800.00	$                        -	None
Utilities	$                 340.00	$                 372.00	$                   32.00	Unfavourable
Administration	$            14,424.00 [13200 + (1.8 x 680)]	$            14,280.00	$                 144.00	Favourable
Total expense	$            35,810.00	$            35,569.00	$                 241.00	Favourable