MBA 538 Case Study Summer, 2019 The Case The Little Theater 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 Theater has tentatively planned to put on six different productions with a total of 108 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 years planning budget appear below. The Little Theater Costs from the Planning Budget For the year ended December 31 Budgeted number of productions Budgeted number of performances 108 Actors and directors' wages Stagehand wages Ticket booth personnel & ushers wages Scenery, costumes & props Theater hall rent $216,000 32,400 16,200 108,000 54,000 27,000 12,000 43,200 $508,800 Printed programs Publicity Administrative expenses Total 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 off the scenery is the same. Likewise, the cost of publicizing a play with posters and radio commercials is the same whether or not there is 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 cult to analyze, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions staged, and the remaining 10% 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 168 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 not shown here.) Data concerning the actual costs appear below. The Little Theater Actual Costs For the year ended December 31 Budgeted number of productions Budgeted number of performances 168 Actors and directors' wages Stagehand wages Ticket booth personnel & ushers wages Scenery, costumes & props Theater hall rent $341,800 49,700 25,900 130,600 78,000 38,300 Printed programs 15,100 Publicity Administrative expenses 47,500 $726,900 Total Questions 1. Using Exhibit 9-8 as your guide, prepare a flexible budget performance report for the year that shows both spending variances and activity variances. 2. If you were the board of directors of the theater, would you be pleased with how well costs were controlled during the year? Why or why not? 3. The cost formulas provide figures for the average cost per production and average cost per performance. How accurate do you think these figures would be for predicting the cost a new production or of an additional performance of a particular performance? Requirements 1. Using Excel, answer Question 1 above. For maximum points, use formulas wherever possible. 2. Using Word, answer Questions 2 & 3. Please make sure to write at an appropriate graduate school level. Remember that you are writing neither a doctoral dissertation nor a social media post
