1 Part 2 2 A small local blood bank has been trying to support the needs of the community, and has processed 3 20% more blood than had been originally planned for the month. The following is a cost control report. 4 5 6 7 8 9 Blood Bank Cost Performance report For the Month ended April 20XX Actual Budget Variance 500 400 100 $ 8,500 $8,000 $ 500 U 6,800 6,000 800 U Refreshment for Donors 1,200 1,100 100 U Administrative supplies 550 Total variable costs 17,050 400 15,500 150 U 1,550 U 14 15 10 11 Liters of blood collected 12 13 Variable Costs: Medical Supplies Lab Tests 16 17 18 19 20 Fixed Costs 21 Staff Salaries 22 Equipment Depreciation 23 Rent 24 Insurance 25 26 Total Cost 27 28 Total Fixed Costs $10,000 $10,000 2,795 0 2,780 15 U 1,000 1,000 0 540 530 10 U 14,335 14,310 25 U 31,385 29,810 1,575 U 29 The managing director of the blood bank was very unhappy with this report, claiming that his costs were higher 30 than expected due to the emergencies in the community. The managing director has heard that you just finished a 31 course that discussed flexible budgets. He has asked you to assist him in developing a flexible budget that 32 will show his superiors that he has controlled costs in most areas. 33 Required: 34 1. Prepare a revised budget for April using the flexible performance approach. 35 You need to use cell reference to calculate the variance. You must designate a variance for each cost category and for the total cost: U or F. 36 The variable and fixed cost labeling has been set correctly, so do not change this around. 37 2. Comment on how you developed this revised report and what it means. You must explicitly explain how you computed the numbers in the revised cost control report. 38 3. Explain which variances in the report you prepared should be investigated. Why? Do not answer that no variances should be investigated, since the Blood Bank is concerned with safety issues that might be impacted by changes in cost. 39 Solution: 40 41 42 Blood Bank Revised Cost Performance report For the Month ended April 20XX 40 41 42 43 44 Blood Bank Revised Cost Performance report For the Month ended April 20XX 45 46 Liters of blood collected 47 48 Variable Costs: 49 50 51 52 53 54 Medical Supplies Lab Tests Refreshment for Donors Administrative supplies Total variable costs 55 Fixed Costs 56 Staff Salaries 57 Equipment Depreciation 58 Rent 59 Insurance 60 61 Total Fixed Costs Actual Budget Variance U or F Total Cost 62 2. Comment on how you developed this revised report and what it means. You must explicitly explain how you computed the numbers in the revised cost control report. 63 64 65 66 3. Explain which variances in the report you prepared should be investigated. Why? Do not answer that no variances should be investigated, since the Blood Bank is concerned with safety issues that might be impacted by changes in cost. 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81