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 Medical supplies Lab tests Equipment depreciation Rent Utilities Administration 880 700 $ 10,268$ 8,120 $ 2,148 U 2,178 U 230 U 12,328 1,430 1,200 370 14,070 $ 39,666 30 U 180 U 34,900 $ 4,766 U 10,150 1,200 1,200 340 13,890 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 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 Lab tests Equipment depreciation Rent Utilities Administration $11.60q $14.50q $1,200 $1,200 $340 $12,700 $1.70q

Explanation / Answer

Prepare flexible budget performance report :

Actual results Spending variance Flexible budget Activity variance Planning budget Medical supplies 10268 60 U 10208 2088 U 8120 Lab tests 12328 432 F 12760 2610 U 10150 Equipment depreciation 1430 230 U 1200 None 1200 Rent 1200 None 1200 None 1200 Utilities 370 30 U 340 None 340 Administration 14070 126 F 14196 306 U 13890 Total expenses 39666 238 F 39904 5004 U 34900

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