The Wakanda Club in Bahrain maintains a Theatre and Arts Development Centre for the use of the Arts and Entertainment Committee of the Club, other groups and exhibitions. The theatre and arts development centre is a profit centre in the Club. Management decisions are taken by the Committee that meets regularly to review the financial performance and to plan the use of the facilities of the centre. The theatre employs a full-time non-performing staff at a cost of BD19,200 per month and several artistes at a cost of BD70,400 a month. The theatre puts on a new production of 22 performances each month. Most of the productions are very popular and on average performances put on by the Arts and Entertainment Committee fills the theatre 75%. The theatre has the following monthly costs: Cost item BD Actors' costumes 11,200 Scene Sets 6,600 Electricity and Water charges 20,600 Share of Wakanda Club Admin Costs 32.000 Casual employees 7.100 Refreshments 4,700 The capacity of the theatre is 1,000 seats which are priced as follows: Number Price per of Seats Seat BD 200 40 500 30 300 20 Occupancy is assumed to be equally distributed across the three seat prices for performances. During performances, the theatre sells refreshments. This raises BDBD15,500 per month. Each performance has a programme whose sells cover the costs of producing the programme; advertising in the programmes generates additional revenue of BD13,400 a month. Recently a popular international touring company approached the Wakanda Club with a proposal to stage their performance in the theatre 25 times in one month. The group offered to pay 75% of its ticket sales for the booking. Having done its research, the group believes that the theatre will be at full capacity for 15 nights and expects to achieve 85% capacity for the remaining 10 nights. The company proposes to charge the following prices for the seats: Number Normal Price Proposal by of Seats per Seat the company BD BD 200 40 35 30 25 300 20 15 500 Wakanda Club will cover the electricity and water charges. It will also continue to pay the Artistes and the non-performing employees who will sell refreshments, programmes and so forth. The Committee expects that going ahead with the requested booking will not cause a change in the income from refreshments and programme sales. Please note that the Arts and Entertainment Committee includes the share of the Wakanda Club administration costs when making profit calculations. Required: The Group: (a) Explain the concept of relevant costs in costing accounting (1 Mark) (b) Calculate the net benefit of accepting the touring company's proposal, ensuring that you explain the costs to be included or excluded from your calculations. (10 Marks) (c) Based on your calculations in (a), state whether the Committee should accept the touring company's proposal. (1 Mark) (d) State other factors that may have a bearing on the Committee's decision. (1 Marks) (e) Advice the Committee on how it might boost the profits of the Centre in future (2 Marks) The Wakanda Club in Bahrain maintains a Theatre and Arts Development Centre for the use of the Arts and Entertainment Committee of the Club, other groups and exhibitions. The theatre and arts development centre is a profit centre in the Club. Management decisions are taken by the Committee that meets regularly to review the financial performance and to plan the use of the facilities of the centre. The theatre employs a full-time non-performing staff at a cost of BD19,200 per month and several artistes at a cost of BD70,400 a month. The theatre puts on a new production of 22 performances each month. Most of the productions are very popular and on average performances put on by the Arts and Entertainment Committee fills the theatre 75%. The theatre has the following monthly costs: Cost item BD Actors' costumes 11,200 Scene Sets 6,600 Electricity and Water charges 20,600 Share of Wakanda Club Admin Costs 32.000 Casual employees 7.100 Refreshments 4,700 The capacity of the theatre is 1,000 seats which are priced as follows: Number Price per of Seats Seat BD 200 40 500 30 300 20 Occupancy is assumed to be equally distributed across the three seat prices for performances. During performances, the theatre sells refreshments. This raises BDBD15,500 per month. Each performance has a programme whose sells cover the costs of producing the programme; advertising in the programmes generates additional revenue of BD13,400 a month. Recently a popular international touring company approached the Wakanda Club with a proposal to stage their performance in the theatre 25 times in one month. The group offered to pay 75% of its ticket sales for the booking. Having done its research, the group believes that the theatre will be at full capacity for 15 nights and expects to achieve 85% capacity for the remaining 10 nights. The company proposes to charge the following prices for the seats: Number Normal Price Proposal by of Seats per Seat the company BD BD 200 40 35 30 25 300 20 15 500 Wakanda Club will cover the electricity and water charges. It will also continue to pay the Artistes and the non-performing employees who will sell refreshments, programmes and so forth. The Committee expects that going ahead with the requested booking will not cause a change in the income from refreshments and programme sales. Please note that the Arts and Entertainment Committee includes the share of the Wakanda Club administration costs when making profit calculations. Required: The Group: (a) Explain the concept of relevant costs in costing accounting (1 Mark) (b) Calculate the net benefit of accepting the touring company's proposal, ensuring that you explain the costs to be included or excluded from your calculations. (10 Marks) (c) Based on your calculations in (a), state whether the Committee should accept the touring company's proposal. (1 Mark) (d) State other factors that may have a bearing on the Committee's decision. (1 Marks) (e) Advice the Committee on how it might boost the profits of the Centre in future (2 Marks)