Visit a local movie theater and check out both its concession area and its showing areas. The manager of a theater must confront questions such as:

• How much return do we earn on concessions?
• What types of movies generate the greatest sales?
• What types of movies generate the greatest net income?

Required

Assume that you are the new accounting manager for a 16-screen movie theater (ten of the auditoriums have 150 seats each; the other six auditoriums each have 400 seats). You are to set up a responsibility accounting reporting framework for the theater.

1. Recommend how to segment the different departments of a movie theater for responsibility reporting.
2. Propose an expense allocation system for heat/air conditioning, rent, insurance, and maintenance costs of the theater.