eBook Ask Check my work Check My Work button is now enabled2Item 1 Item 1 Item Skipped KM Flexible Budgeting Case [LO9-1, LO9-2, LO9-3] Theodore's 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. Theodore's Theatre had tentatively planned to put on seven different productions with a total of 45 performances. For example, one of the productions was Peter Rabbit, which had a seven-week run with three performances on each weekend. The costs from the current years planning budget appear below. Theodore's Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions 7 Budgeted number of performances 45 Actors and directors wages $ 112,500 Stagehands wages 20,250 Ticket booth personnel and ushers wages 12,150 Scenery, costumes, and props 59,500 Theater hall rent 33,750 Printed programs 11,025 Publicity 19,600 Administrative expenses 42,000 Total $ 310,775 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 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 theaters program to six productions and a total of 49 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: Theodore's Theatre Actual Costs For the Year Ended December 31 Actual number of productions 6 Actual number of performances 49 Actors and directors wages $ 116,500 Stagehands wages 21,850 Ticket booth personnel and ushers wages 13,650 Scenery, costumes, and props 55,800 Theater hall rent 38,350 Printed programs 11,475 Publicity 18,600 Administrative expenses 40,450 Total $ 316,675 Required: 1. Prepare a flexible budget for Theodore's 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.