Study 3

The Little Theatre is a nonprofit organization devoted to staging plays for children. The theatre 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 costs from the current years planning budget appear below. The Little Theatre had tentatively planned to put on four different productions with a total of 50 performances. For example, one of the productions was Peter Rabbit, which had a six-week run with three performances on each weekend.

The Little Theatre Costs from the Planning Budget For the Year Ended December 31
Budgeted number of productions		4
Budgeted number of performances		50
Actors and directors wages	$	110,000
Stagehands wages		21,000
Ticket booth personnel and ushers wages		12,000
Scenery, costumes, and props		32,800
Theatre hall rent		36,000
Printed programs		11,500
Publicity		10,000
Administrative expenses		46,000
Total	$	279,300

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 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 theatres program to three productions and a total of 54 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:

The Little Theatre Actual Costs For the Year Ended December 31
Actual number of productions		3
Actual number of performances		54
Actors and directors wages	$	114,000
Stagehands wages		22,000
Ticket booth personnel and ushers wages		13,500
Scenery, costumes, and props		29,100
Theatre hall rent		40,600
Printed programs		11,950
Publicity		9,000
Administrative expenses		44,450
Total	$	284,600

Required:

1. Complete the flexible budget for The Little Theatre based on the actual activity of the year.

The Little Theatre
Flexible Budget
For the Year Ended December 31
Actors and directors wages
Stagehands wages
Ticket booth personnel and ushers wages
Scenery, costumes, and props
Theatre hall rent
Printed programs
Publicity
Administrative expenses
Total	$0

2. Complete the flexible budget performance report for the year that shows both activity variances and spending variances. (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.)

The Little Theatre
Flexible Budget Performance Report
For the Year Ended December 31
	Actual Results	Spending Variances		Flexible Budget	Activity Variances		Planning Budget
Actors' and directors' wages	$114,000						$110,000
Stagehands' wages	22,000						21,000
Ticket booth personnel and ushers' wages	13,500						12,000
Scenery, costumes, and props	29,100						32,800
Theatre hall rent	40,600						36,000
Printed programs	11,950						11,500
Publicity	9,000						10,000
Administrative expenses	44,450						46,000
Total	$284,600			$0			$279,300