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    Performance Report using a Flexible Budget Approach

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    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.

    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.)

    KGV Blood Bank
    Flexible Budget Performance Report
    For the Month Ended September 30
    Activity Variances Spending Variances
    Medical supplies $
    $

    Lab tests

    Equipment depreciation

    Rent

    Utilities

    Administration

    ________________________________________ ________________________________________
    Total expense $
    $.

    © BrainMass Inc. brainmass.com October 10, 2019, 3:49 am ad1c9bdddf
    https://brainmass.com/business/auditing/performance-report-flexible-budget-approach-436868

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    KGV Blood Bank
    Cost Control Report
    For the Month Ended September 30
    Planning Actual   Variances
    Budget Results
      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 ...

    Solution Summary

    The solution discusses using a flexible budget approach for a performance report.

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