The St Lucia Blood Bank, a private charity partly supported by govemment grants,

Question

The St Lucia Blood Bank, a private charity partly supported by govemment grants, is located on the Caribbean isand 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 SL Lucia, but esidents of SL Lucia willi y donated their blood to help people on the islands. As a consequence, the 1 od bank collected and processed over 20% more bood than had been o inaly planned or he month. A repot prepared by a government official comparing actual costa to budgeted costs tor the blood bank appears below. Continued support from the gowernment depends on the blood bank's ability to demonstrate control over its costs St. Lucia Blood Bank Cost Control Report For the Month Ended Septomber 30 ActualPlanning ResutsBudgot Lsers Medical supplies Lab lests Equipment depreciaion of blood colected 10,375 12.293 1370 1,700 2,150 U 2.178 U 270 U 8,225 1.700 280 312 14.395 14250 145 40445 35,670 4,775 U Uti ities 32 U Total expense 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 ecipients 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 govemment; he was just pointing out that actual costs were a lot higher than promised in the budget The folowing cost formuas were used to construct the planning budget:

Explanation / Answer

Ans. St. Lucia Blood Bank Flexible Budget Performance Report For the Month Ended September 30 Actual Spending Variance Flexible Activity Variance Planning Results Budget Budget Litters of blood collected 880 880 700 Medical supplies 10375 35 U 10340 2115 U 8225 Lab tests 12293 423 F 12716 2601 U 10115 Equipment depreciation 1370 270 U 1100 0 no effect 1100 Rent 1700 0 no effect 1700 0 no effect 1700 Utilities 312 32 U 280 0 no effect 280 Administration 14395 125 F 14520 270 U 14250 Total expenses 40445 211 F 40656 4986 U 35670 *Calculations for Flexible budget: *The flexible budget is prepared on the basis of Actual result units. Flexible budget Medical supplies 11.75*880 Lab tests 14.45*880 Equipment depreciation 1100 Rent 1700 Utilities 280 Administration 13200+(1.50*880) Revenue and Spending variance   =    Actual results - Flexible budget. Activity variance = Flexible budget - Planning budget. *Increase in Expenses from Planning to flexible and Flexible to Actual    =   Unfavorable. *Decrease in Expenses from Planning to flexible and Flexible to Actual    =   Favorable.

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