A small local blood bank has been trying to support the needs of the community, and has processed
20% more blood than had been originally planned for the month. The following is a cost control report.
Blood Bank
Cost Performance report
For the Month ended April 20XX
						Actual	Budget	Variance
Liters of blood collected					500	400	100
Variable Costs:
	Medical Supplies					$ 8,500	$ 8,000	$ 500	U
	Lab Tests					6,800	6,000	800	U
	Refreshment for Donors					1,200	1,100	100	U
	Administrative supplies					550	400	150	U
		Total variable costs			17,050	15,500	1,550	U
Fixed Costs
	Staff Salaries					$ 10,000	$ 10,000	0
	Equipment Depreciation					2,795	2,780	15	U
	Rent					1,000	1,000	0
	Insurance					540	530	10	U
		Total Fixed Costs			14,335	14,310	25	U
	Total Cost					31,385	29,810	1,575	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 emergencies in the community. The managing director has heard that you just finished a
course that discussed flexible budgets. He has asked you to assist him in developing a flexible budget that
will show his superiors that he has controlled costs in most areas.
Required:
1. Create revised budget for April using the flexible performance approach.
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.
The variable and fixed cost labeling has been set correctly, so do not change this around.
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.
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.
Solution:
Blood Bank
Revised Cost Performance report
For the Month ended April 20XX
						Actual	Budget	Variance	U or F
Liters of blood collected
Variable Costs:
	Medical Supplies
	Lab Tests
	Refreshment for Donors
	Administrative supplies
		Total variable costs
Fixed Costs
	Staff Salaries
	Equipment Depreciation
	Rent
	Insurance
		Total Fixed Costs
	Total Cost
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.
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.