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:

St. Lucia Blood Bank
Cost Control Report
For the Month Ended September 30 Actual Results Planning Budget Variances Liters of blood collected 620 500 Medical supplies $ 9,250 $ 7,500 $ 1,750 U Lab tests 6,180 6,000 180 U Equipment depreciation 2,800 2,500 300 U Rent 1,000 1,000 0 Utilities 570 500 70 U Administration 11,740 11,250 490 U Total expense $ 31,540 $ 28,750 $ 2,790 U Required: 1. Complele the performarice report for Seplember using the flexisle budgel approach. (Indicate the offect of each variance by selecting F for favorable, "" for unfavorable, and "None" for no effect (i.e,zero variance). Input all amounts as positive values. Flexible Budget Performance Report For the Month Ended Septemher 30 Spending Variances Actual Flexible Activity VariancesPlanning Medical suppies Lab lests Equipemerit depreciaio Rent Ubltes 5 9250 5 7,50D 6,000 2,500 2.800 1000 570 11,740 31,540 11,250 5 28,750 Total expense

Explanation / Answer

Actual results Spending variances Flexible budget Activity variances Planning budget Medical supplies 9250 50 F 9300 1800 U 7500 Lab tests 6180 1260 F 7440 1440 U 6000 Equipment depreciation 2800 300 U 2500 0 None 2500 Rent 1000 0 None 1000 0 None 1000 Utilities 570 70 U 500 0 None 500 Administration 11740 190 U 11550 300 U 11250 Total expenses 31540 750 F 32290 3540 U 28750

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