The Sesame Street Theater is a non-profit organization devoted to staging plays for children. The theater has a 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 2015 planning budget appear below. The Sesame Theater had tentatively planned to put on six different productions with a total of 72 performances. For example, one of the productions was Swan Lake which had six performances.

The Sesame Theater Planning Master Budget

For the Year ended December 31, 2015

Budgeted number of productions: 6 | Budgeted number of performances:72

Actors and directors wages $172,800 Stagehands wages 32,400 Ticket Booth personnel and ushers wages 12,960 Scenery, costumes, and props 51,600 Theater Hall rent 54,000 Printed programs 12,600 Publicity 15,600 Administrative expenses 51,840 Total $403,800

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 Swan Lake 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 5, 10, or 15 performances of the play. On the other hand, the wages of the actors, directors, stagehands, ticketbooth 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 theprograms will vary with the number of performances. Administrative expenses are more difficult to pindown, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend onthe number of productions staged, and the remaining 10% depend on the number of performances.After the beginning of 2015, the board of directors of the theater authorized changing the theatersprogram to five productions and a total of 75 performances. Actual costs were higher than the costsfrom the planning budget. Data concerning the actual costs are shown below:

The Sesame Theater

Actual Costs for 2015

Actual number of productions: 5 Actual number of performances: 75

Actors and directors wages $177,600 Stagehands wages 34,400 Ticket Booth personnel and ushers wages 14,760 Scenery, costumes, and props 47,160 Theater Hall rent 59,520 Printed programs 13,140 Publicity 14,400 Administrative expenses 49,980 Total $410,960

QUESTION:

-Prepare a flexible budget report for the Sesame Street Theater based on the actual activity for theyear showing all variances whether favorable or unfavorable.

-If you were on the board of directors of the theater, would you be pleased with how well costs werecontrolled during the year? Why or why not?

-Based on the 2015 Planning Master Budget calculate the average cost per production and theaverage cost per performance. How accurate do you think these figures would be for predicting thecost of a new production, or of an additional performance of a particular production? Discuss.