The St. Lucia Blood Bank, a private charity partly supported by government grant
ID: 2598058 • Letter: T
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 $ 9,040 $ 6,900 $ 2,140 U Lab tests 10,884 8,700 2,184 U Equipment depreciation 2,000 1,700 300 U Rent 1,000 1,000 0 Utilities 288 260 28 U Administration 14,045 13,900 145 U Total expense $ 37,257 $ 32,460 $ 4,797 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: Medical supplies $11.50q Lab tests $14.50q Equipment depreciation $1,700 Rent $1,000 Utilities $260 Administration $13,000 + $1.50q 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.)
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish.
Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $7.00 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $5.00 per jar.
This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct costs involved in the processing of a jar of silver polish are:
The production supervisor has no duties other than to oversee production of the silver polish. The mixing equipment is special-purpose equipment acquired specifically to produce the silver polish. Its resale value is negligible and it does not wear out through use.
Advertising costs for the silver polish total $3,000 per month. Variable selling costs associated with the silver polish are 5% of sales.
Due to a recent decline in the demand for silver polish, the company is wondering whether its continued production is advisable. The sales manager feels that it would be more profitable to sell all of the Grit 337 as a cleaning powder.
What is the incremental contribution margin per jar from further processing of Grit 337 into silver polish? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
What is the minimum number of jars of silver polish that must be sold each month to justify the continued processing of Grit 337 into silver polish? (Round your intermediate calculations to 2 decimal places.)
Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish.
Grit 337 is a coarse cleaning powder with many industrial uses. It costs $1.60 a pound to make, and it has a selling price of $7.00 a pound. A small portion of the annual production of Grit 337 is retained in the factory for further processing. It is combined with several other ingredients to form a paste that is marketed as Sparkle silver polish. The silver polish sells for $5.00 per jar.
This further processing requires one-fourth pound of Grit 337 per jar of silver polish. The additional direct costs involved in the processing of a jar of silver polish are:
Explanation / Answer
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The St. Lucia Blood Bank Performance Report For the Month Ended September 30 Formula Planning Budget Activity Variances Flexible Budget Spending Variances Actual Results Liters of blood collected N/A 600 780 780 Medical supplies $11.50q 6900 2070 U 8970 70 U 9040 Lab tests $14.50q 8700 2610 U 11310 426 F 10884 Equipment depreciation 1700 0 None 1700 300 U 2000 Rent 1000 0 None 1000 0 None 1000 Utilities 260 0 None 260 28 U 288 Administration $13000 + $1.50q 13900 270 U 14170 125 F 14045 Total expenses $ 32460 4950 U 37410 153 F 37257Related Questions
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