The KGV Blood Bank, a private charity partly supported by government grants, is
ID: 2449310 • Letter: T
Question
The KGV 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 is given below. (The currency on St. Lucia is the East Caribbean dollar.) 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:
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.)
The KGV 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 is given below. (The currency on St. Lucia is the East Caribbean dollar.) Continued support from the government depends on the blood bank’s ability to demonstrate control over its costs.
KGV Blood Bank Flexible Budget Performance Report For the Month Ended September 30 Planning Budget Flexible Budget Actual Results Activity Variances Spending Variances Medical supplies Lab tests Equipment depreciation Rent Utilities Administration Total expense 8,085 9,975 1,400 1,700 260 14,325 $35,745 $ 10,227 12,147 1,600 1,700 284 14,590 $40,548Explanation / Answer
KGV Blood Bank Flexible Budget Performance Report For the Month Ended September 30 Planning Budget Activity Variances Flexible Budget Spending Variances Actual Results Liters of blood collected (q) 700 880 880 Medical supplies ($11.55q) $8,085 $2,079 U $10,164 $63 U $10,227 Lab tests ($14.25q) 9,975 $2,565 U 12,540 ($393) F 12,147 Equipment depreciation ($1,400) 1,400 $0 1,400 $200 U 1600 Rent ($1,700) 1,700 $0 1,700 $0 1700 Utilities ($260) 260 $0 260 $24 U 284 Administration ($13,100 + $1.75q) 14,325 $315 U 14,640 ($50) F 14,590 Total expense $35,745 $4,959 U $40,704 ($156) F $40,548
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