Activity & Spending Variance: KGV Blood Bank, SecuriDoor Corporation, Toque Cooking Academy

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 30% 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.

KGV Blood Bank Cost Control Report For the Month Ended September 30

Planning Budget

Actual Results

Variances

Liters of blood collected

600

780

Medical supplies

$

7,110

$

9,252

$

2,142

U

Lab tests

8,610

10,782

2,172

U

Equipment depreciation

1,900

2,100

200

U

Rent

1,500

1,500

0

Utilities

300

324

24

U

Administration

14,310

14,575

265

U

Total expense

$

33,730

$

38,533

$

4,803

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

$11.85q

Lab tests

$14.35q

Equipment depreciation

$1,900

Rent

$1,500

Utilities

$300

Administration

$13,200 + $1.85q

Required:

1.

Complete the performance report for September using the flexible budget approach. (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Omit the "$" sign in your response.)