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 consequenoe, the blood bank oollected 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 governmentdepends 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 Varianoes Liters of blood collected Medical supplies Lab tests Equipment depreciation 880 700 5 10,210 $ 8,050 $2,160 U 12,157 9,975 2,182 U 1560 1300 280 U 1400 1.400 Utilities 284 28024 U 14,405 14230175 U Total expense 40,016 $35,215 $4,801 U The managing director of the blood bankwas 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 fgures had been submited by the blood bank to the government, he was just pointing out that actual costs were a lothigher than promised in he budget The following cost formulas were used to construct the planning budget Medical supplies Lab test Equipment depreciation Rent Utilities $11.50q $1425q $1,300 $1,400 5280 $12,900 $1.90q Required: 1. Complete the performanoe 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 (ie zero variance). Input all amounts as positive values. Do not round intemediate calculations and round your final answers to nearest whole dollar)

Explanation / Answer

Spending Variance is calculated as a diffference between actual cost and standard cost as per activity level

Activity variance is the difference between Standard cost of actual activity level and budgeted cost

Actual Cost Spending variance Flexible Budget Activity Variance Planning budget Item Cost formula ( Actual Cost - Flexible Budget) 880 Units (Flexible Budget - Planning Budget) Medical supplies 11.50q 10210 90 Unfavourable 10120 2070 Unfavourable 8050 Lab Tests 14.25q 12157 383 Favourable 12540 2565 Unfavourable 9975 Equipment Depreciation 1300 1560 260 Unfavourable 1300 0 No effect 1300 Rent 1400 1400 0 No effect 1400 0 No effect 1400 Utilities 260 284 24 Unfavourable 260 0 No effect 260 Administration 12900 + 1.90 q 14405 167 Favourable 14572 342 Unfavourable 14230 40016 176 Favourable 40192 4977 Unfavourable 35215

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