Introduction

On a typical February wintry day in New England, rehearsals for the upcoming play Kamala occurred inside two rented rooms of a church in Belmont, Mass. The actors were all present for the rehearsal despite a snowstorm warning for the morning. The heat from the passionate and intense drama was riveting for the observers in the room, making the wintry day a little more tolerable. But Jayanti Bandyopadhyay, the actor portraying the lead female role Sarita, had more on her mind than the powerful lines she had to deliver in the play and the heat in the room. She was concerned about the production's budget for the four shows planned for late March. By the afternoon, bright sunshine made the threat of the snowstorm disappear, and Jayanti's memory drifted back to when the company made the decision to produce Kamala. The Stage Ensemble Theater Unit (SETU) just completed a successful production staging one of the Indian epics, The Ramayana, in the latter part of 2016. The success meant the company had a comfortable cash reserve, which emboldened Subrata Das, the director, to consider producing Kamala, a play that had special meaning for the company and for him and Jayanti. It was SETU's first production when the theater company was founded in 2023, and Subrata and Jayanti had played the leading male and female roles. The play was set in contemporary times with a strong social justice message quite different from the historic epics that SETU had now become famous for.

As a community theater company, SETU's historic epics with a large cast brought in more audience members through personal connections and word of mouth. The healthy cash balance from The Ramayana, and the relative lower production costs of contemporary plays led Subrata to believe he could take the risk to reproduce Kamala in 2017. With the March opening only a month away, Jayanti needed a clear budget and sought to get SETU members to focus on marketing, fundraising, and ticket sales so they would have a chance of at least breaking even.

About SETU

Some theater enthusiasts founded SETU in 2023. The community theater company's all-volunteer staff contributed their time and expertise. Its founders charged no participant membership fees. They checked that SETU was incorporated from day one, because they wanted to avoid the "unlimited liability" problem associated with partnerships. All of the founders were professionals, such as college professors, technology entrepreneurs, physicians, and corporate managers. They also organized SETU as a not-for-profit, because its mission was to bridge the culture gap between India and the Western world through the medium of theater. One founder, Jayanti, was a local university accounting professor knew how to apply for section 501(c) (3) status and successfully received approval for operating as a not-for-profit from the Internal Revenue Service and the state of Massachusetts. To keep paperwork manageable for volunteer staff, SETU management limited its annual gross receipts to under $50,000 so that they could file the 990N tax form. By 2017, only two of the original founders, Jayanti and Subrata (successful tech entrepreneur), remained with the company.

The founders committed to perform plays from Indian history and current events in English to improve their accessibility, and that India has a diverse body of languages with over 13 main languages and hundreds of dialects. Thus, India uses English as the common language for most business dealings. Because finding well-written plays with Indian themes in English was not an easy task, the director or others often had to translate plays written in one of the Indian languages into English. Their last play, The Ramayana, was a well-known Indian epic, and the script was co-authored by nine members. SETU had successfully operated for 15 years and had built a good reputation in the Greater Boston area as a theater company introducing Indian culture while giving education and performance opportunities to passionate theater lovers, experienced and novice alike.

The Making of Kamala

The end-of-March production, Kamala, was inspired by a true story, written in the Indian language Marathi by a famous playwright, Vijay Tendulkar, in 1991 and then translated into English by Priya Adarkar in 2017. Ashwin Sarin, a newspaper Indian Express journalist bought a girl from a "rural flesh market" and presented her at a press conference to expose such a modern society malaise. Moved by this news story, Vijay skillfully created a play that exposed the dark side of a male-dominated society. The main character, Jaisingh Jadav, was also an investigative journalist, but Vijay wanted him to be more complex, not a flawless hero. Vijay portrayed Jaisingh's behavior toward his wife Sarita as no better than treating a woman like a slave. The story showed the parallels of a poor village woman sold away in the slave trade and a so-called happy housewife married to a self-serving journalist, both finding themselves on the common platform of sexual slavery in a male-dominated world. Vijay had visited Boston in 2002. The cast and crew met him for a discussion and contributed a sizeable amount to the playwright and obtained his permission to stage the play in 2003, which was SETU's first production as a theater company.

Pre-Production

The director, Subrata, discussed via email with Tanuja Mohite, Vijay's daughter, to get permission to stage the play again in 2017. She indicated that the royalty fee would be Rupees or International Normalized Ratio (INR) 2000 per show. Subrata agreed to pay INR 12,000 in anticipation of six shows for the current production. Given the U.S. Dollar-Indian Rupee exchange rates between January and March 2017, INR 12,000 plus bank fees for the money transfer would total about US$200, which seemed reasonable as the royalty fee. He decided to place some music and dance pieces in the script, because he wanted to create and added culture specific appeal, especially in line with the well-known reputation of song- and dance-studded Bollywood movies. Including the dancers, the play had a cast of 13 people and about five crew members for stage management, make-up, music, and light operation. Jayanti felt that everyone was passionate about acting and being on stage, but no one was thinking about the production budget. She called her longtime friend Subrata, the director, about preparing a detailed budget.

Jayanti and Subrata were the two SETU members with check-signing authority and electronic access to SETU's checking account at Citizens Bank. The account required a minimum balance of $2,000 to avoid check writing fees. Both founders agreed that $2,000 was also a good amount as the prudent reserve and not used to cover future production expenses. As of February 1, 2017, the checking account had a $9,525.32 balance from prior production receipts over expenditureswith $7,525.32 available for future productions. Subrata was sure that, with SETU's established reputation in the Boston area, assuring a full house for each show was doable. The checking account balance might have provided him with a false sense of security. Jayanti was more cautious and took into account the fact that Kamala might draw a smaller audience when searching for a venue.

After viewing various options, the Mosesian Center for the Arts Black Box Theater in Watertown seemed best. It was near Subrata's residence, as he would have to go back and forth often during the performance days. SETU negotiated a contract with the Black Box Theater, whose key terms are summarized in Exhibit 1. The Black Box Theater charged a fixed fee of $1,000 for the use of the space for the weekend of March 31, April 1, and April 2 and for March 30 for setting up the stage and a dress rehearsal. They also charged a one-time set-up fee of $30 for the box office. Technical support and lighting fees were $30 per hour with a minimum four-hour charge. The sound technician charged $30 per hour with a minimum four-hour charge. The stage manager charged $60 per show. SETU planned four shows over the weekend, with each show running for 90 minutes. At the time of planning, SETU would exceed the four-hour minimum requirement. SETU's certificate of liability insurance annual coverage was valid until June 30, 2017, satisfying a requirement for the contract with the Black Box Theater.

Unfortunately, the sound system failed at the theater, and it rented additional equipment for $300, leading to budgeting $200 for miscellaneous sound and lighting expenses. The group used a church for the weekly Sunday rehearsals. Subrata informed Jayanti that the church expected no formal payment. But, if the church were used each Sunday for two months for rehearsals, a $300 donation seemed appropriate. Jayanti reminded Subrata that while the amount seemed reasonable, the classification could not be a donation, because SETU is a not-for-profit organization. The amount would be considered as rent to be paid.

The set for Kamala was modest compared with an historic epic. It required a living room set for an upper-middle class household of a journalist. Several cast members lent their own furniture, wall hangings, and other props for the play. If these items were to be rented, a minimum cost of $200 would be incurred. One cast member who owned a small stage decorating business took charge of the stage decoration and volunteered her services, which would cost at least $500 if SETU had to pay. Jayanti looked into renting a van for hauling the furniture to and from the venue. Renting the van seemed to be at least $500. Jayanti was thanked her sister to volunteer to drive her truck back and forth to haul the furniture, thus saving the van rental cost. The play's costumes were not as elaborate or unique as in past productions. Jayanti found out that make-up materials left over from past productions were sufficient for this production, and any new materials would be taken care of by each cast member.

Promotion and Marketing

Next, they discussed possible sources of funds. Since SETU charged no membership fees, the major source of funds were from ticket sales. Because the play was about a current social concern in India, both Subrata and Jayanti realized that most of the audience would most likely be from the Indian-origin population in the Greater Boston area. Nonetheless, they dreamed of having a full house including all ethnicities. They knew that promotion would be needed to reach a wider group. They reviewed several local e-news sources, such as India New England News ($150 negotiated fee), The Foundations TV ($150 negotiated fee), and Lokvani ($60 negotiated fee). These e-news sources would host weekly ads to promote Kamala for three months on their pages. The Foundations TV would post clips of rehearsals and interviews with cast members on its Facebook page. India New England News agreed to publish an article about the upcoming production during the week before the performances. A total of $360 was the budget for these sources. While Jayanti was getting concerned with the perceived ever-increasing costs, she realized that marketing and promotion would have to be an integral and crucial part of this production.

A professional graphic artist among the SETU group volunteered to create theatrical poster for Kamala, whose market value was at least $500. Even with donated artwork, the printing costs of posters and playbills were estimated to total $150. Subrata also casually mentioned that he considered setting up accounts on more social media outlets for SETU and expanding engagement on SETU's Facebook. The idea had instant appeal. Jayanti, the ever-vigilant accountant, added, "I think this is a great idea, but which social media outlet and how?" Subrata said that SETU had many Facebook connections with past patrons who plus their friends could become part of SETU's posts. Subrata commissioned three cast members to be continuously active on various social media outlets. All of them were professionals with full-time jobs but agreed to volunteer their service to market SETU's production. Their voluntary service for this production was estimated to be $300 if an outside consultant were to be hired, even for a not-for-profit. Jayanti had always voluntarily provided SETU with accounting and bookkeeping expertise. She jokingly reminded Subrata that SETU was saving at least $300 in bookkeeping costs even for simple bookkeeping.

While ticket sales would likely form the main source of funds, Jayanti and Subrata saw that SETU must broaden its revenues to cover the expenses needed to produce Kamala. They sought sponsorships and advertising spaces, as the story had universal appeal. During the past production of the epic Ramayana, one cast member (a psychologist by profession) helped raise $2,500 from her network. This fundraising effort was the best one in SETU's history, because Ramayana was a well-known and well-loved story. Jayanti and Subrata had hoped for $200 in cash sponsorship from the same network for the smaller Kamala production.

While other theater venues sold Indian snacks such as samosas to generate revenues, new rules at the Black Box Theater prohibited selling food items. Management had their own concession stand though they allowed free promotional snack items for the audience. Subrata and Jayanti decided to offer samosas to the audience for free to enhance an Indian cultural experience. A cast member was able to negotiate a fixed price of $275 with a local Indian restaurant for providing samosas on all three days. Traditionally, SETU had provided light sandwiches for the cast and crew during performance days. Subrata's wife Janique had a very good relationship with the owner of Russo Farms through her bakery delivery business. Russo Farms agreed to donate $300 worth of sandwiches and vegetable platters for the cast and crew for the performance weekend.

Making the Numbers Work

After talking with Subrata, Jayanti began preparing the budget in a Microsoft Excel spreadsheet. She had to estimate how many tickets they needed to cover all known costs. They planned to put on four shows over the weekendone on Friday evening, two on Saturday, and one on Sunday afternoon. The Black Box Theater could accommodate up to 90 people per show. But, SETU never had a full house for each show. In the recent past, the epics achieved 75% to 80% occupancy. Due to the mature and difficult issues explored in Kamala, SETU expected occupancy to be as low as 50%--with ticket prices at $25 for adults and $22 for students and seniors. The price included a $2 facility fee and a $3 box office fee per ticket to be paid to the Black Box Theater for setup and commission (see Exhibit 1). These prices appeared reasonable compared with similar entertainment events in the Indian-origin community. See Exhibit 2 for a summary of data used in estimating receipts. Jayanti decided she must email all SETU members explaining the budget and why everyone's effort in selling the number of tickets necessary to cover those costs was crucial. She knew that her task was difficult because the majority of the actors and artists were not necessarily thinking of the business side of the production, especially because SETU was not-for-profit.

From a financial perspective, keeping costs under control was a key factor. Besides detailing actual cash costs, she thought members would appreciate knowing the contributed value of volunteers which helped keep costs low. Knowing the minimum number of tickets needed to break even would enable her to be proactive if ticket sales did not meet projection. That information would also motivate each member to promote the play on individual personal Facebook pages and invite friends and families to attend. Fifteen years of production experience also meant that Jayanti and Subrata knew things might not always go as planned, from cost overrun to show cancellations due to weather. Jayanti focused on the spreadsheet and considered various scenarios.

CASE QUESTIONS: Please answer bolded questions in write up/paragraph form.

1. Prepare budgeted statement, using main "Receipts" & "Expenditures" Sections, that contain subcategories to compare actual with budgeted valuesand using proper currencies. Fill in the budget column using information from the case. Leave the actual column blank.

2. Using the budget prepared in Question 1:

a. Identify each cost as variable, fixed, or step relative to tickets sold. E.g., determine weighted average ticket prices and contribution margin from the sales mix information (% of adult tickets vs. % of student and senior tickets).

b. In the first case, assume that all funds arise only from ticket sales, with four shows in total. Compute the breakeven point in number of tickets to be sold and in U.S. dollars.

c. In the second case, assume the same in (b) but only three shows in total. Compute the breakeven point in number of tickets to be sold and in U.S. dollars.

d. In the third case, assume that SETU would receive sponsorship funds (cash and in-kind donations) in addition to ticket sales for four shows. Compute the breakeven point in number of tickets to be sold and in U.S. dollars.

e. In the fourth case, assume that SETU would receive sponsorship funds (cash and in-kind donations) in addition to ticket sales for three shows. Compute the breakeven point in number of tickets to be sold and in U.S. dollars.

f. Comment on the feasibility of the required number of ticket sales computed from above, considering the nature of the play, that it is staged by a community theater organization, and the ethnicity aspect. Suggest how SETU can achieve the necessary amount of ticket sales.

3. SETU often ignored member- and supporter-contributed labor or personal items who typically did not ask for receipts for tax purposes. We called these contributions as hidden costs because they were excluded in the budget and the financial statements. But, in scenarios where members or supporters did not have the expertise, these functions would require paid services, and the items must be purchased or rented.

a. Identify and approximate the value of contributed human resources and personal items from actors and patrons.

b. Incorporate these hidden costs and measure their impact on the budgeted statement in Question 1 and the breakeven numbers and U.S. dollars calculated in Question 2.

c. Evaluate the importance of the above hidden costs that were not explicit cash outlays or when donors required no receipt for tax purposes.