Answer the two questions.

Case A. The Sun Island Blood Bank had a very busy September. Storms caused a lot of damage and injuries on nearby islands, but spared Sun Island. Sun Islanders were anxious to donate blood to support medical needs for the many injured people. The Blood Bank blew through their projected operations with 20% more liters collected and processed than planned.

The Sun Island Blood Bank is a private non-profit that relies on government grants to maintain operations. The government insists that the Blood Bank manage its costs each month in order to receive the next months support. The governments Cost Control Report is shown below.

Sun Island Blood Bank
Cost Control Report
For the Month Ended September 30
	Actual Results	Static Budget	Variances
Liters of blood collected	610	500
Medical supplies	$9250	$7500	$1750	U
Lab tests	6180	6000	180	U
Equipment depreciation	2800	2500	300	U
Rent	1000	1000	0
Utilities	570	500	70	U
Administration	11740	11250	490	U
Total expense	$31,540	$28,750	$2790	U

This Cost Control Report is causing some conflict between the Managing Director of Sun Island Blood Bank and the government official. The government official says that these are the numbers reported by the blood bank, and they show unfavorable variances in every cost category except rent. The blood bank did not control costs as they are supposed to do in order to continue to receive funding. The Managing Director is trying to explain that there were many more tests performed than anticipated due to the storm, and many costs had been reimbursed by patients and other organizations on the nearby islands. The government official cant see any reimbursed costs, only unfavorable cost variances.

Here are the cost formulas used by the staff at the Blood Bank to prepare the static budget.

	Cost Formulas
Medical supplies	$15.00 per liter
Lab tests	$12.00 per liter
Equipment depreciation	$2500
Rent	$1000
Utilities	$500
Administration	$10,000 + $2.50 per liter

1. Is there a better report that the Managing Director could present to the government official that would explain the cost variances and the points made by the Managing Director? Prepare that report.

2. Consider the variances in the report that you prepared. Which should be investigated? Which should not be investigated? Why?