Problem 6 Performance report with more than one cost driver number of performances. Administrative expenses are more difficult to analyse, 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 theatre authorized expanding the theatre'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 ibut are not shown here). Data concerning the actual costs appear below. The little Theatre is a non-profit organisation devoted to staging plays for children. The theatre has a very small full-time professional administrative staff. Through a special arrangement with the actor's union, actors and directors rehearse without pay and are paid only for actual performances. The Little Theatre had 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 year's planning budget appear below The Little Theatre Costs from the Planning Budget For the Year Ended December 31 The Little Theatre Actual Costs For the Year Ended December 31 Budgeted number of productions Budgeted 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 Actual number of productions Actual number of performances Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Sconery, costumes, and props Theater hall rent Printed programs 108 216,000 32,400 16,200 108,000 54,000 27,000 12,000 168 $ 341,800 49,700 25,900 130,600 78,000 38,300 15,100 47.500 $726,900 $508,800 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 of the scenery is the same. Likewise, the cost of publicizing a play with posters and radio commercials is the same whether there whether there are 10,20, or 30 performances of the play. One 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 cost of renting the hall and printing the programs will vary with the Required: 1. Prepare a flexible budget performance report for the year that shows both spending variances and activity variances 2. If you were on the board of directors of the theatre, 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 of a new production or of an additional performance of a particular production
