Theodore's 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.
Theodore's Theatre had tentatively planned to put on seven different productions with a total of 60 performances. For example, one of the productions was Peter Rabbit, which had a seven-week run with three performances each weekend. The costs from the current years planning budget appear below.
Required:
1. Prepare a flexible budget for Theodore's Theatre based on the actual activity of the year.
2. Prepare a report for the year that shows the spending variances for all expense items.
Theodore's Theatre is a nonprofit organization devoted to staging plays for children. The theater has a very small full-time professional administratve staff Through a special arrangement with the actors' union, actors and directors rehearse without pay and are paid only for actual performances. Theodore's Theatre had tentatively planned to put on seven different productions with a total of 60 performances. For example, one of the productions was Peter Rabbit, which had a seven-week run with three performances on each weekend. The costs from the current year's planning budget appear below. Theodore s Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productlons number of performances 60 Actors and directors wages Stagehands wages Ticket booth Scenery, costumes, and props Theater hall rent Printed progras Publicity Administrative expenses 144,000 26,400 13,800 58,800 44,400 ,100 17,500 42,000 358,000 personnel and ushers wages Total Some of the costs vary with the number of productions, some with the number of performances, and some are fixed and depend on nelther 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. Llkewise, 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 70% of the budgeted costs are fixed, 20% 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 theater authorized expanding the theater's program to six productions and a total of 64 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 Theodore's Theatre Actual Costs For the Year Ended December 31 Actual number of productions Actual number of performances 64 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery,costumes, and props Theater hall rent Printed prograna Publicity Administrative expenses 148,000 28,000 15,300 55,100 49,000 1,550 16,500 40.450 Total 363,900
