St Lucia Blood Bank Case on Flexible Budgeting

Performance Reporting for a Non$-$Profit Organization

St Lucia Blood Bank $($SLBB$),$ a private charity partly supported by government grants, is located on the Caribbean island of

St Lucia. Its operations just finished for September, which was a busy month due to a powerful hurricane that hit neighbor

islands causing many fatalities and injuries. The hurricane missed St Lucia, but its residents willingly donated their blood to

help their neighbors. While the islands are fiercely competitive among themselves, especially in events like track, they bond

together quickly and completely during times of need, such as in natural disasters. As a result, SLBB collected and

processed over $20\%$ more blood than had been originally planned and budgeted for the month. A report prepared by a local

island government official comparing actual costs to budgeted costs for the month for the SLBB appears below.

Government support depends on the SLBB$\text{'}$s ability to control its costs.

St Lucia Blood Bank

Cost Control Report For the Month of September $2019$

The manager of the SLBB was very unhappy with this report and all its unfavorable variances, when he thought that his

department had done a wonderful job of responding quickly to the natural disaster on the neighboring islands. He was also

quick to point out that all the additional costs over and above the originally budgeted costs had been fully covered by

payments received from the grateful recipients of the affected islands. The government official who prepared the report,

responded that all the figures had been submitted by the SLBB to the government. He was just pointing out that actual costs

were a lot higher than promised in the original budget, by $$2,790,$ or almost $10\%.$ The following cost formulas were used to

construct the original budget:

Required: $1.$ Prepare a new performance report using the flexible budget approach.

What, if anv, recommendations will vou make as a result of this flexible budget? Please provide a detailed explanation on how to solve and the solution. Thank you.