The KGV Blood Bank, a private charity partly supported by government grants, is

Question

The KGV 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 is given below. (The currency on St. Lucia is the East Caribbean dollar.) Continued support from the government depends on the blood bank's ability to demonstrate control over its costs. 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: Required: Complete the performance report for September using the flexible budget approach.

Explanation / Answer

KGV blood bank

Flexible budget performance report

For the mont ended september 30

Working notes

Activity variance = (Actual qty - Budgeted qty)*Budgeted cost per unit

Spending variance = Budgeted cost actual output- Actual Cost

Note: Since Ffixed cost remains same at all level of outputs therefore no activity variance will arise on depreciation, Rent and utilities.

Planning Budget Activity Variance Flexible Budget Spending variance Actual Result Medical Supplies $6900 2070U 8970 72U 9042 Lab Tests $8610 2583U 11193 411F 10782 Equipment Dereciation $1300 Nil $1300 200U $1500 Rent $1500 Nil $1500 Nil $1500 Utilities $330 Nil $330 24U $354 Administration $14020 306U $14326 41F $14285

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