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 are:

Budgeted number of productions: 6

Budgeted number of performances: 108

Actors and Directors wages: $226,800

Stagehands wages $43,200

Ticket booth personnel and ushers wages $27,000

Scenery, costumes and props 108,600

Theater hall rent $64,800

Printed programs $37,800

Publicity $12,600

Administrative expenses $54,000

Total: $574,800

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:

Actual number of productions: 7

Actual number of performances: 168

Actors and Directors wages: $369,100

Stagehands wages $66,200

Ticket booth personnel and ushers wages $43,400

Scenery, costumes and props $131,000

Theater hall rent $93,500

Printed programs $53,800

Publicity $16,100

Administrative expenses $62,500

Total: $835,700

1. Prepare a flexible budget performance report for the year that shows both spending variances and activity variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Little Theatre Flexible Budget Performance Report For the year ended......
	Actual Results	Spending Variances	Flexible Budget	Activity Variances	Planning Budget
Number of Productions	7		7		6
Number of Performances	168		168		108
Costs
Actor and Diectors Wages	$369,100	$16,300 U	$352,800	$126,000U	$ 226,800
Stagehands Wages	66,200	1,000 F	67,200	24,000 U	43,200
Ticket Booth Personnel and Ushers Wages	43,400	1,400 U	42,000	15,000 U	27,000
Scenery, Costumes and Props	131,000	4,300 U	126,700	18,100 U	108,600
Theatre Hall Rent	93,500	7,300 F	100,800	36,000 U	64,800
Printed Programs	53,800	5,000 F	58,800	21,000 U	37,800
Publicity	16,100	1,400 U	14,700	2,100 U	12,600
Administrative Expenses	62,500	4,150 U	58,350	4,350 U	54,000
Totals	$835,600	$14,250 U	$821,350	$246,550U	$574,800

Fixed component of administrative expenses = $ 54,000 x 75 % = $ 40,500

Administrative expense per production = ( $ 54,000 x 15 % ) / 6 = $ 1,350 per production

Administrative expense per performance = ( $ 54,000 x 10 % ) / 108 = $ 50 per performance

Expected administrative expense as per flexible budget = $ 40,500 + $ 1,350 x 7 + $ 50 x 168 = $ 58,350