Part $2$: Is covered in Module $23$ Learning Objective $2.$ I also have support material in the Module $23$ Resources in the applicable weekly area.

A small local blood bank has been trying to support the needs of the community, and has processed

more blood than had been originally planned for the month. The following is a cost control report.

Blood Bank

Cost Performance report

For the Month ended April $20$XX

Actual Budget Variance

Liters of blood collected $43540035$

Variable Costs:

Medical Supplies $$8,400$ $$8,000$ $$400$ U

Lab Tests $6,6006,000600$ U

Refreshment for Donors $1,2001,100100$ U

Administrative supplies $500400100$ U

Total variable costs $16,70015,5001,200$ U

Fixed Costs

Staff Salaries $$10,000$ $$10,0000$

Equipment Depreciation $2,7902,78010$ U

Rent $1,0001,0000$

Insurance $5355305$ U

Total Fixed Costs $14,32514,31015$ U

Total Cost $31,02529,8101,215$ 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.

Required:

$1.$ Prepare a revised budget for April using the flexible performance approach.

You need to use cell reference to calculate the variance $.$ You must designate a variance for each cost category and for the total cost: U or F$.$

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. You must explicitly explain how you computed the numbers in the revised cost control report.

$3.$ Explain which 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$.$

Solution:

Blood Bank

Revised Cost Performance report

For the Month ended April $20$XX

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.

$3.$ Explain which 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$.$