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 six different productions with a total of 60 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 appear below Theodore's Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions Budgeted number of performances 60 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total $ 144,000 26,400 15,600 50,400 44,400 14,400 16,200 42,000 $ 353,400 Some of the costs vary with the number of productions, some with the number of performances, and some are fixed and depend or 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 60% of the budgeted costs are fixed, 20% depend on the number of productions staged, and the remaining 20% 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 five 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: Theodore's The atre Actual Costs For the Year Ended December 31 Actual number of productions Actual number of performances 64 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total $ 148,000 28,000 17,100 46,700 49,000 14,850 15,200 40,450 359,300 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 Required Required 2 Prepare a flexible budget for Theodore's Theatre based on the actual Theodore's Theatre Flexible Budget For the Year Ended December 31 Actual number of productions Actual number of performances Actors' and directors' wages Stagehands' wages Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total expense Required 1 Required 2 Prepare a report for the year that shows the spending variances for all expense items. (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 Theodore's Theatre Spending Variances For the Year Ended December 31 Actual Flexible Budget Spending Variances Results Number of productions Number of performances 64 Actors' and directors' wages Stagehands' wages Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total expense S 148,000 28,000 17,100 46,700 49,000 14,850 15,200 40,450 S 359,300 Required 1