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Performance report using flexible budget

UCFF Blood Bank, private charity that is supported by grants, is located on an island. It just finished its operation for September, which was a particularly busy month due to a powerful hurricane that hitting neighboring islands, causing injuries. The island donated their blood to the islands that were affected. AS a consequence, the blood bank collected and processed over 25% more blood than had been originally planned for the month.
A report was prepared by a government official comparing actual cost to budget cost for the blood bank appears below.
(Currency on the island is East Caribbean dollar) Continued support from the government depends on the blood bank's ability too demonstrate control over cost.
UCFF Blood Bank
Cost Control Report
For the Month Ended September 30

Actual Budget Variance
Liters of blood collected 780 600 180
Variable Cost:
Medical supplies $9.252 $7,110 $2,142 U
Lab Tests 10,782 8,610 2,172 U
Refreshments for donors 1,186 960 226 U
Administrative supplies 189 150 39 U
Total variable cost 21,409 16,830 4,579 U

Fixed Costs:
Staff salaries 13,200 13,200 0
Equipment 2,100 1,900 200 U
Rent 1,500 1,500 0
Utilities 324 300 24 U

Total fixed cost 17,124 16,900 224 U
Total cost $38,533 $33,730 $4,803 U

The managing director of the blood bank was very unhappy with the report, claming that his costs were higher than expected due to the emergency on the neighboring islands. Also pointed out was, the additional cost were covered by payments from grateful recipients on the other islands. The govt. official that prepared the reported countered that all the figures had been submitted by the blood bank to the government; he was just pointing out that the actual cost =were a lot higher than promised in the budget.

1. Prepare a new performance report for September using flexible budget approach. (Note: Even though some of these costs might be classified as direct costs rather than as overhead, the flexible budget approach can still be used to prepare a flexible budget performance report.)
2. Do you think any of the variances in the report prepared should be investigated? Why?


Solution Summary

The solution explains how to prepare a performance report using flexible budget