Question

The Little 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.

The Little Theatre had tentatively planned to put on six different productions with a total of 108 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.

The Little Theatre Costs from the Planning Budget For the Year Ended December 31
Budgeted number of productions		6
Budgeted number of performances		108
Actors and directors wages	$	252,720
Stagehands wages		69,120
Ticket booth personnel and ushers wages		52,920
Scenery, costumes, and props		110,040
Theater hall rent		90,720
Printed programs		63,720
Publicity		14,040
Administrative expenses		79,920
Total	$	733,200

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 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 analyze, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% 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 seven productions and a total of 168 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:

The Little Theatre Actual Costs For the Year Ended December 31
Actual number of productions		7
Actual number of performances		168
Actors and directors wages	$	436,500
Stagehands wages		105,800
Ticket booth personnel and ushers wages		85,400
Scenery, costumes, and props		132,300
Theater hall rent		130,700
Printed programs		91,000
Publicity		18,500
Administrative expenses		98,500
Total	$	1,098,700

Prepare a flexible budget performance report for the year that shows both spending variances and activity variances

The Little Theatre Flexible Budget Performance Report For the Year Ended December 31 Actual Results Revenue and Spending Variances Flexible Budget Activity Variances Planning Budget Number of productions 7 7 6 Number of performances 168 168 108 Actors' and directors' wages $436,500 $252,720 Stagehands' wages 105,800 69,120 Ticket booth personnel and ushers' wages 85,400 52,920 Scenery, costumes, and props 132,300 110,040 Theatre hall rent 130,700 90,720 Printed programs 91,000 63,720 Publicity 18,500 14,040 Administrative expenses 98,500 79,920 Total $1,098,700 $733,200

Answer 1

The Little Theatre
Flexible Budget Performance Report
For the year ended December 31
	Workings:	Actual results	Revenue and Spending Variances		Flexible Budget	Activity Variance		Planning Budget
Production	x	7			7			6
Performance	y	168			168			108
Director and Actor wages	($252720/108) X 168	$   4,36,500	$      43,380	U	$   3,93,120	$   1,40,400	U	$2,52,720
Stagehands wages	($69120/108) X 168	$   1,05,800	$         1,720	F	$   1,07,520	$      38,400	U	$    69,120
Ticket booth and usher wages	($52920/108) X 168	$      85,400	$         3,080	U	$      82,320	$      29,400	U	$    52,920
Scenery, costumes and props	($110040/6) X 7	$   1,32,300	$         3,920	U	$   1,28,380	$      18,340	U	$1,10,040
Theatre hall rent	($90720/108) X 168	$   1,30,700	$      10,420	F	$   1,41,120	$      50,400	U	$    90,720
Printed programs	($63720/108) X 168	$      91,000	$         8,120	F	$      99,120	$      35,400	U	$    63,720
Publicity	($14040/6) X 7	$      18,500	$         2,120	U	$      16,380	$         2,340	U	$    14,040
Administrative expenses	[$79920*.75] + [($79920*.15)*7/6] + ($79920*.10)*168/108]	$      98,500	$      12,142	U	$      86,358	$         6,438	U	$    79,920
Total expenses		$10,98,700	$      44,382	U	$10,54,318	$   3,21,118	U	$7,33,200