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	$	237,600
Stagehands wages		54,000
Ticket booth personnel and ushers wages		37,800
Scenery, costumes, and props		109,200
Theater hall rent		75,600
Printed programs		48,600
Publicity		13,200
Administrative expenses		50,760
Total	$	626,760

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	$	396,900
Stagehands wages		82,700
Ticket booth personnel and ushers wages		60,900
Scenery, costumes, and props		131,600
Theater hall rent		109,000
Printed programs		69,300
Publicity		17,100
Administrative expenses		55,900
Total	$	923,400

Required:

1. Prepare a flexible budget for The Little 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.

	The Little Theatre Flexible Budget For the Year Ended December 31 Actual number of productions    Actual number of performances Actors' and directors' wages Stagehands' wages Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent Printed programs Publicity Administrative expenses Total expense

.)

The Little Theatre Spending Variances For the Year Ended December 31 Actual Results Spending Variances Flexible Budget Number of productions 7 Number of performances 168 Actors' and directors' wages $396,900 Stagehands' wages 82,700 Ticket booth personnel and ushers' wages 60,900 Scenery, costumes, and props 131,600 Theater hall rent 109,000 Printed programs 69,300 Publicity 17,100 Administrative expenses 55,900 Total expense $923,400

Answer 1

The Little Theatre
Flexible Budget
For the year ended December 31
	Workings:	Flexible Budget
Production	x	7
Performance	y	168
Actor's and Director's wages	($237600/108) X 168	$   3,69,600
Stagehands wages	($54000/108) X 168	$      84,000
Ticket booth and usher wages	($37800/108) X 168	$      58,800
Scenery, costumes and props	($109200/6) X 7	$   1,27,400
Theatre hall rent	($75600/108) X 168	$   1,17,600
Printed programs	($48600/108) X 168	$      75,600
Publicity	($13200/6) X 7	$      15,400
Administrative expenses	[$50760*.75] + [($50760*.15)*7/6] + ($50760*.10)*168/108]	$      54,849
Total expenses		$   9,03,249
The Little Theatre
Spending Variance
For the year ended December 31
	Actual results	Spending Variances		Flexible Budget
Production	7			7
Performance	168			168
Actor's and Director's wages	$                           3,96,900	$      27,300	U	$      3,69,600
Stagehands wages	$                              82,700	$         1,300	F	$         84,000
Ticket booth and usher wages	$                              60,900	$         2,100	U	$         58,800
Scenery, costumes and props	$                           1,31,600	$         4,200	U	$      1,27,400
Theatre hall rent	$                           1,09,000	$         8,600	F	$      1,17,600
Printed programs	$                              69,300	$         6,300	F	$         75,600
Publicity	$                              17,100	$         1,700	U	$         15,400
Administrative expenses	$                              55,900	$         1,051	U	$         54,849
Total expenses	$                           9,23,400	$      20,151	U	$      9,03,249