Problem 9.21 Performance report for a Nonprofit Organisation

The St. Lucia Blood Bank, a private charity party supported by government grants, is located on the Caribbean Island of St. Lucia. The blood bank has just finished its operations for September, which was a very busy month due to a powerful hurricane that hit neighboring islands causing many injuries. The hurricane largely bypassed St. Lucia, but residents of St. Lucia willingly donated their blood to help people on other islands. Therefore, the blood bank collected and processed over 20% more blood than had been originally planned for the month.

A report prepared by a government official comparing actual costs to budgeted costs for the blood bank appears below. Continued support from the government depends on the blood bank's ability to demonstrate control over its costs.

St. Lucia Blood Bank Cost control report For the month ended September 30
	Actual results	Planning budget	Variances
Liters of blood collected	620	500
Medical supplies	$9,250	$7,500	$1,750 U
Lab tests	6,180	6,000	180 U
Equipment depreciation	2,800	2,500	300 U
Rent	1,000	1,000	0
Utilities	570	500	70 U
Administration	11,740	11,250	490 U
Total expense	31,540	28,750	2,790 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 emergency on the neighboring islands. He also pointed out that the additional costs had been fully covered by payments from grateful recipients on the other islands. The government official who prepared the report countered that all the figures had been submitted by the blood bank to the government; he was just pointing out that actual costs were a lot higher than promised in the budget.

The following cost formulas were used to construct the planning budget:

Cost Formulas
Medical supplies	15.00q
Lab tests	12.00q
Equipment depreciation	2,500
Rent	1,000
Utilities	500
Administration	10,000+2.50q

Required:

1. Using Exhibit 9.8 as your guide, prepare a flexible budget performance report for September

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