A small local blood bank has been trying to support the needs of the community, and has processed over 20% more blood than had been originally planned for the month. The following is a cost control report.

Blood Bank

Cost control report

For the Month ended April 20XX

Actual

Budget

Variance

Liters of blood collected

600

500

100

Variable Costs:

Medical Supplies

$ 9,000

$ 8,000

$ 1,000

U

Lab Tests

6,800

6,000

800

U

Refreshment for Donors

1,200

900

300

U

Administrative supplies

500

375

125

U

Total variable costs

17,500

15,275

2,225

U

Fixed Costs

Staff Salaries

$ 10,000

$ 10,000

0

Equipment Depreciation

2,800

2,775

25

U

Rent

1,000

1,000

0

Insurance

550

530

20

U

Total Fixed Costs

14,350

14,305

45

U

Total Cost

31,850

29,580

2,270

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.

Grading Rubric:

Each number in revised cost control report

0.2

pt. each

U or F variance designation

0.25

pt. each

Comments each for #2 and #3

0.5

Total points possible

6.5

Required:

Hint: Review the narrated PowerPoint for chapter 11

1. Prepare a new cost control report for April using the flexible performance approach.

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.

3. Do you think any of the variances in the report you prepared should be investigated? Why?

Solution: You need to show your work either by cell reference or showing your calculation to the side. Also, make sure designate the Variance U or F.

Blood Bank

Revised Cost control 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. Do you think any of the 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.