Please solve the attached problem.

Problem 2 Worth 6.5 pts. 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 Liters of blood collected Budget Variance 600 Variable Costs: Medical Supplies Lab Tests Refreshment for Donors Administrative supplies Total variable costs 500 100 $9,000 6,800 1,350 500 17,650 $8,000 6,000 1,100 375 15,475 $1,000 800 250 125 2,175 $10,000 2,800 1,000 570 14,370 32,020 $10,000 2,750 1,000 530 14,280 29,755 U U U U U Fixed Costs Staff Salaries Equipment Depreciation Rent Insurance Total Fixed Costs Total Cost 0 50 U 0 40 U 90 U 2,265 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. Blood Bank Revised Cost control report For the Month ended April 20XX Actual Budget Variance 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. Problem 2 Worth 6.5 pts. 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 Liters of blood collected Budget Variance 600 Variable Costs: Medical Supplies Lab Tests Refreshment for Donors Administrative supplies Total variable costs 500 100 $9,000 6,800 1,350 500 17,650 $8,000 6,000 1,100 375 15,475 $1,000 800 250 125 2,175 $10,000 2,800 1,000 570 14,370 32,020 $10,000 2,750 1,000 530 14,280 29,755 U U U U U Fixed Costs Staff Salaries Equipment Depreciation Rent Insurance Total Fixed Costs Total Cost 0 50 U 0 40 U 90 U 2,265 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. Blood Bank Revised Cost control report For the Month ended April 20XX Actual Liters of blood collected Budget 600 Variable Costs: Medical Supplies Lab Tests Refreshment for Donors Administrative supplies Total variable costs 600 $9,000 $6,800 $1,350 $500 17,650 $9,600 $7,200 $1,320 $450 18,570 Variance $- $600 F $400 F $(30) U $(50) U 920 F Fixed Costs Staff Salaries Equipment Depreciation Rent Insurance $10,000 $10,000 $- N $2,800 $2,750 $(50) U $1,000 $1,000 $- N $570 $530 $(40) U Total Fixed Costs 14,370 14,280 (90) U Total Cost 32,020 32,850 830 F 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. The revised chart has been developed with actual units on budgeted cost. This is called flexible budget. The actual units are more than the budgeted units, hence the variable cost needs to be increased with the increase in number. The total vatiable cost of 500 units is $15,475, has been increased to $18,570 for 600 units. The comparision of flexible budget with actual indicate that there is favorable variance of $920. The fixed cost is not changed with the increase / derease in number of units, therefore it will be the same $14,280 for 600 units also. Hence the unfavorable variance of $90 will not change. The total cost variance is $830, favarable, and therefore it indicates the efficiency of management. 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. The favorable variance of Medical supplies and Lab tests should be investigated. The variance of Medical supplies is 6.25% of budgeted cost and 5.55% for Lab tests. The details of expenses should be investigated and reasons for this favouable must be analyzed. The variance due to saving in cost due to bulk purchases is a acceptable and should be promoed, but saving due to compromise in safety requirements, cannot be accepted. The other variances are of very small values and can be ignored from investigations. Problem 2 Worth 6.5 pts. 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 Liters of blood collected Budget Variance 600 Variable Costs: Medical Supplies Lab Tests Refreshment for Donors Administrative supplies Total variable costs 500 100 $9,000 6,800 1,350 500 17,650 $8,000 6,000 1,100 375 15,475 $1,000 800 250 125 2,175 $10,000 2,800 1,000 570 14,370 32,020 $10,000 2,750 1,000 530 14,280 29,755 U U U U U Fixed Costs Staff Salaries Equipment Depreciation Rent Insurance Total Fixed Costs Total Cost 0 50 U 0 40 U 90 U 2,265 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. Blood Bank Revised Cost control report For the Month ended April 20XX Actual Liters of blood collected Budget 600 Variable Costs: Medical Supplies Lab Tests Refreshment for Donors Administrative supplies Total variable costs 600 $9,000 $6,800 $1,350 $500 17,650 $9,600 $7,200 $1,320 $450 18,570 Variance $- $600 F $400 F $(30) U $(50) U 920 F Fixed Costs Staff Salaries Equipment Depreciation Rent Insurance $10,000 $10,000 $- N $2,800 $2,750 $(50) U $1,000 $1,000 $- N $570 $530 $(40) U Total Fixed Costs 14,370 14,280 (90) U Total Cost 32,020 32,850 830 F 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. The revised chart has been developed with actual units on budgeted cost. This is called flexible budget. The actual units are more than the budgeted units, hence the variable cost needs to be increased with the increase in number. The total vatiable cost of 500 units is $15,475, has been increased to $18,570 for 600 units. The comparision of flexible budget with actual indicate that there is favorable variance of $920. The fixed cost is not changed with the increase / derease in number of units, therefore it will be the same $14,280 for 600 units also. Hence the unfavorable variance of $90 will not change. The total cost variance is $830, favarable, and therefore it indicates the efficiency of management. 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. The favorable variance of Medical supplies and Lab tests should be investigated. The variance of Medical supplies is 6.25% of budgeted cost and 5.55% for Lab tests. The details of expenses should be investigated and reasons for this favouable must be analyzed. The variance due to saving in cost due to bulk purchases is a acceptable and should be promoed, but saving due to compromise in safety requirements, cannot be accepted. The other variances are of very small values and can be ignored from investigations