Bristol Valley Theatre is a nonprofit organization devoted to staging plays for children. The theatre 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 costs from the current years planning budget appear below. The theatre had tentatively planned to put on six different productions with a total of 108 performances. For example, one of the productions was The Wizard of Oz, which had a six-week run with three performances on each weekend.

Bristol Valley 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	$	216,000
Stagehands wages		32,400
Ticket booth personnel and ushers wages		16,200
Scenery, costumes, and props		108,000
Theatre hall rent		54,000
Printed programs		27,000
Publicity		12,000
Administrative expenses		43,200
Total	$	508,800

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 doesnt make any difference how many times The Wizard of Oz 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 80% of the budgeted costs are fixed, 10% depends on the number of productions staged, and the remaining 10% depends on the number of performances.

After the beginning of the year, the Board of Directors of the theatre authorized expanding the theatres program to seven productions and a total of 132 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:

Bristol Valley Theatre Actual Costs For the Year Ended December 31
Actual number of productions		7
Actual number of performances		132
Actors and directors wages	$	314,600
Stagehands wages		38,500
Ticket booth personnel and ushers wages		21,450
Scenery, costumes, and props		136,750
Theatre hall rent		77,000
Printed programs		28,300
Publicity		25,300
Administrative expenses		42,500
Total	$	684,400

Required:

1. Prepare a flexible budget for the Bristol Valley Theatre based on the actual activity for the year. Be sure to clearly show the cost equations that you used.

2. Prepare a complete flexible budget performance report for the year that shows both spending variances and activity variances. Explain these variances.

3. The cost formulas provide figures for the average cost per production and the average cost per performance. How accurate do you think these figures would be for predicting the cost of a new production or of an additional performance of a particular production?

4. Summarize your evaluation of the financial results of the theatres season. Be very specific here. If you were on the Board of Directors, would you be pleased with how well costs were controlled during the year? Why or why not? What questions would you have for management? Is there any additional information you would like to know?