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. St. Lucia Blood Bank Cost Control Report For the Month Ended September 30 Actual Results Planning Budget Variances Liters of blood collected 780 600 Medical supplies $ 9,292 $ 7,140 $ 2,152 U Lab tests 10,792 8,610 2,182 U Equipment depreciation 1,400 1,100 300 U Rent 1,300 1,300 0 Utilities 374 350 24 U Administration 14,460 14,280 180 U Total expense $ 37,618 $ 32,780 $ 4,838 U 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: Cost Formulas Medical supplies $11.90q Lab tests $14.35q Equipment depreciation $1,100 Rent $1,300 Utilities $350 Administration $1.80q Required: 1. 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. Do not round intermediate calculations and round your final answers to nearest whole dollar.)

* This is all the information right out of the book***

Explanation / Answer

Actual Spending variances Flexible budget Activity variances Planning budget Liters of blood collected 780 780 600 Medical supplies 9292 10 U 9282 2142 U 7140 Lab tests 10792 401 F 11193 2583 U 8610 Equipment depreciation 1400 300 U 1100 0 None 1100 Rent 1300 0 None 1300 0 None 1300 Utilities 374 24 U 350 0 None 350 Administration 14460 144 F 14604 324 U 14280 Total expense 37618 211 F 37829 5049 U 32780

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