The St. Lucia Blood Bank, a private charity partly supported by government grant

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.

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:

  

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
Cost Control Report
For the Month Ended September 30 Actual Results Planning Budget Variances Liters of blood collected 780 600 Medical supplies $ 9,226 $ 7,080 $ 2,146 U Lab tests 10,824 8,640 2,184 U Equipment depreciation 1,570 1,300 270 U Rent 1,000 1,000 0 Utilities 332 300 32 U Administration 14,025 13,860 165 U Total expense $ 36,977 $ 32,180 $ 4,797 U

Explanation / Answer

Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Medical supplies 9226 22 U 9204 2124 U 7080 Lab tests 10824 408 F 11232 2592 U 8640 Equipment depreciation 1570 270 U 1300 0 None 1300 Rent 1000 0 None 1000 0 None 1000 Utilities 332 32 U 300 0 None 300 Administration 14025 123 F 14148 288 U 13860 Total expense 36977 207 F 37184 5004 U 32180

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