The Childrens Theatre

The Childrens 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.

The Childrens Theatre had tentatively planned to put on six different productions with a total of 108 performances. For example, one of the productions was The Lion King, which had a six- week run with three performances on each weekend. The costs from the current years planning budget appear below.

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 The Lion King 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 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.

The theatre company is considering charging $50 per ticket, which will maximize attendance at 140 attendees per performance. The theatre company is also considering charging $60 per ticket, however attendance is expected to decrease by 16% if it increases the pricing. This pricing calculation is predicated on six productions and 108 performances.

After consideration, the board of directors of the theater is considering expanding the theaters program to seven productions and a total of 168 performances.

If the theatre company puts on 7 productions and 168 performances, the expected number of attendees per performance will decrease, if the price structure is kept the same as 6 productions and 108 performances.

If producing 7 productions and 168 performances, $60 per ticket is expected to draw on average 98 attendees per performance. The theatre company is also considering charging $50 per ticket, which will increase attendance on average 22% over the $60 ticket price.

The Childrens Theatre company has asked for your expertise to help determine the level of production to pursue.

Required:

1. Prepare a flexible sales budget report for the year showing the four pricing levels and expected ticket volume.

2. Prepare a flexible budget cost report for the year showing the two levels of production.

3. Prepare four budgeted income statements, one for each level of production at a given

   price structure.

4. Which performance and ticket price structure would you advise the Childrens Theatre

   Company to utilize?

Following your meeting, the Childrens Theatre Company has decided to produce 7 shows and 168 productions. The revenue budgets were exactly correct. At the end of the year actual costs appear below:

6. Prepare two income statements, one for each pricing schedule and production costs at 7 productions and 168 performances. Did your recommendation work out?

The Children' s Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions Budgeted number of performances 108 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, costumes, and props $216,000 32,400 16,200 108,000 54,000 27,000 12,000 43,200 Theater hall rent Printed programs publicity Administrative expenses Total $ 508,800 The Children's Theatre Actual Costs For the YearEnded December 31 Actual number of productions 168 Actual number of periormances $ 341,800 49,700 25,900 130,600 78,000 38,300 15,100 47,500 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses $ 726,900 Total The Children' s Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions Budgeted number of performances 108 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, costumes, and props $216,000 32,400 16,200 108,000 54,000 27,000 12,000 43,200 Theater hall rent Printed programs publicity Administrative expenses Total $ 508,800 The Children's Theatre Actual Costs For the YearEnded December 31 Actual number of productions 168 Actual number of periormances $ 341,800 49,700 25,900 130,600 78,000 38,300 15,100 47,500 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses $ 726,900 Total