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 wilingly 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 Planning Results Budget Variances Liters of blood collected 550 430 $ 7,869 $ 6,450 $1,419 U 185 U 335 U Medical supplies Lab tests Equipmemt depreciation Rent Utilities Administration Total expense 5,001 4,816 3,535 3,200 1,350 759 11,993 84 U 525 U 27,959 $2,548 U 1,350 675 11,468 $ 30,507 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.

Explanation / Answer

Flexible budget performance report :

Actual results Spending variance Flexible budget Activity variance Planning budget Liters of blood collected 550 550 430 Medical supplies 7869 381 F 8250 1800 U 6450 Lab test 5001 1159 F 6160 1344 U 4816 Equipment depreciation 3535 335 U 3200 None 3200 Rent 1350 None 1350 None 1350 Utilities 759 84 U 675 None 675 Administration 11993 213 U 11780 312 U 11468 Total expense 30507 908 F 31415 3456 U 27959

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