Question

Hel KM Flexible Budgeting Case [LO9-1, LO9-2, LO9-3] 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' unlon, actors and directors rehearse without pay and are paid only for actual performances. Theodore's Theatre had tentatively planned to put on six different productions with a total of 50 performances. For example, one of the productions was Peter Rabbit, which had a six-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 produetions Budgeted number of performances 6 50 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages Scenery, cost umes, and props Theater hall rent Printed programs Publicity Adminiatrative expenses $150,000 25,000 16,000 54,000 40,000 13,500 17,400 48,000 $ 363,900 Total 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 doesn't make any difference how many times Peter Rabbit 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 very with the number of performances. The greater the number of performancos, the higher the wage costs wlll be. Similarly, the costs of renting the hall and printing the programs will vary with the number of porformances. 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. 1 of 3 Next Eroy

Answer 1

1.  

Theodore's Theatre Flexible Budget For the year ended December 31
Actual Number of Productions	5
Actual Number of Performances	54
Actors and directors wages	$ 162,000
Stagehand's wages	27,000
Ticket booth personnel and usher's wages	17,280
Scenery, costumes and props	45,000
Theater hall rent	43,200
Printed programs	14,580
Publicity	14,500
Administrative expenses ( 48,000 x 0.70 + 9,600 /6 * 5 + 4,800 / 50 * 54 )	46,784
Total expenses	$ 370,344

2.

Theodore's Theatre Spending Variances For the year ended December 31
	Actual Results	Spending Variances		Flexible Budget
Actual Number of Productions	5			5
Actual Number of Performances	54			54
Actors and directors wages	$ 156,000	$ 6,000	F	$ 162,000
Stagehand's wages	26,600	400	F	27,000
Ticket booth personnel and usher's wages	17,500	220	U	17,280
Scenery, costumes and props	50,300	5,300	U	45,000
Theater hall rent	44,600	1,400	U	43,200
Printed programs	13,950	630	F	14,580
Publicity	16,400	1,900	U	14,500
Administrative expenses ( 48,000 x 0.70 + 9,600 /6 * 5 + 4,800 / 50 * 54 )	46,450	334	F	46,784
Total expenses	$ 371,800	$ 1,456	U	$ 370,344

Multiple choice:

1. Answer: True statements include # 1, # 2 and # 4.