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 eight different productions with a total of 60 performances. For example, one of the productions was Peter Rabbit, which had a eight-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		8
Budgeted number of performances		60
Actors and directors wages	$	120,000
Stagehands wages		24,000
Ticket booth personnel and ushers wages		13,200
Scenery, costumes, and props		64,000
Theater hall rent		42,000
Printed programs		13,200
Publicity		16,000
Administrative expenses		46,000
Total	$	338,400

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 pin down, but the best estimate is that approximately 65% of the budgeted costs are fixed, 20% depend on the number of productions staged, and the remaining 15% 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 64 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		64
Actors and directors wages	$	124,000
Stagehands wages		25,000
Ticket booth personnel and ushers wages		14,700
Scenery, costumes, and props		60,300
Theater hall rent		46,600
Printed programs		13,650
Publicity		15,000
Administrative expenses		44,450
Total	$	343,700
Required: 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