Question

The Little Theatre is a nonprofit organization devoted to staging plays for children. The theater has a very small full-time professional administrative staff. Through a special arrangement with the actors’ union, actors and directors rehearse without pay and are paid only for actual performances.

The Little Theatre had tentatively planned to put on six different productions with a total of 108 performances. For example, one of the productions was Peter Rabbit, which had a six-week run with three performances on each weekend. The costs from the current year’s planning budget appear below.

The Little Theatre Costs from the Planning Budget For the Year Ended December 31
Budgeted number of productions		6
Budgeted number of performances		108
Actors and directors wages	$	235,440
Stagehands wages		51,840
Ticket booth personnel and ushers wages		35,640
Scenery, costumes, and props		109,080
Theater hall rent		73,440
Printed programs		46,440
Publicity		13,080
Administrative expenses		44,460
Total	$	609,420

Some of the costs vary with the number of productions, some with the number of performances, and some are fixed and depend on neither the number of productions nor the number of performances. The costs of scenery, costumes, props, and publicity vary with the number of productions. It doesn’t make any difference how many times Peter Rabbit is performed, the cost of the scenery is the same. Likewise, the cost of publicizing a play with posters and radio commercials is the same whether there are 10, 20, or 30 performances of the play. On the other hand, the wages of the actors, directors, stagehands, ticket booth personnel, and ushers vary with the number of performances. The greater the number of performances, the higher the wage costs will be. Similarly, the costs of renting the hall and printing the programs will vary with the number of performances. Administrative expenses are more difficult to analyze, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions staged, and the remaining 10% depend on the number of performances.

After the beginning of the year, the board of directors of the theater authorized expanding the theater’s program to seven productions and a total of 168 performances. Not surprisingly, actual costs were considerably higher than the costs from the planning budget. (Grants from donors and ticket sales were also correspondingly higher, but are not shown here.) Data concerning the actual costs appear below:

The Little Theatre Actual Costs For the Year Ended December 31
Actual number of productions		7
Actual number of performances		168
Actors and directors wages	$	391,300
Stagehands wages		79,400
Ticket booth personnel and ushers wages		57,400
Scenery, costumes, and props		131,500
Theater hall rent		105,900
Printed programs		66,200
Publicity		16,900
Administrative expenses		49,300
Total	$	897,900

Required:

1. Prepare a flexible budget for The Little Theatre based on the actual activity of the year.

2. Prepare a report for the year that shows the spending variances for all expense items.

Answer 1

1.

Little Theatre Costs for the Flexible Budget For the year ended December 31
Number of Productions	7
Number of Performances	168
Costs:
Actors and Directors Wages ( 235,440 / 108 * 168 )	366,240
Stagehand Wages ( 51,840 / 108 * 168 )	80,640
Ticket Booth Personnel and Usher Wages ( 35,640 / 108 * 168 )	55,440
Scenery, Costumes and Props ( 109,080 / 6 * 7 )	127,260
Theater Hall Rent ( 73,440 / 108 * 168 )	114,240
Printed Programs ( 46,440 / 108 * 168 )	72,240
Publicity ( 13,080 / 6 * 7 )	15,260
Administrative Expenses[ ( 44,460 x 75 % + ( 44,460 x 15 % ) / 6 * 7 + ( 44,460 x 10 % ) / 108 * 168 ]	48,042
Totals	$ 879,362

2.

Little Theatre Spending Variances For the year ended December 31
Cost Item	Flexible Budget	Actual Costs	Spending Variances
Number of Productions	7	7
Number of Performances	168	168
Costs:
Actors and Directors Wages ( 235,440 / 108 * 168 )	$366,240	$391,300	$25,060 U
Stagehand Wages ( 51,840 / 108 * 168 )	80,640	79,400	1,240 F
Ticket Booth Personnel and Usher Wages ( 35,640 / 108 * 168 )	55,440	57,400	1,960 U
Scenery, Costumes and Props ( 109,080 / 6 * 7 )	127,260	131,500	4,240 U
Theater Hall Rent ( 73,440 / 108 * 168 )	114,240	105,900	8,340 F
Printed Programs ( 46,440 / 108 * 168 )	72,240	66,200	6,040 F
Publicity ( 13,080 / 6 * 7 )	15,260	16,900	1,640 U
Administrative Expenses[ ( 44,460 x 75 % + ( 44,460 x 15 % ) / 6 * 7 + ( 44,460 x 10 % ) / 108 * 168 ]	48,042	49,300	1,258 U
Totals	$879,362	$897,900	$18,538 U