Question

Help confused on how to do #2

The Children's Theatre The Children'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. The Children's Theatre had tentatively planned to put on six different productions with a total of 108 performances. For example, one of the productions was The Lion King, which had a six- week run with three performances on each weekend. The budget appear below. costs from the current year's planning The Children's Theatre Costs from the Planning Budget For the Year Ended December 31 Budgeted number of productions Budgeted number of performances 108 Actors and directors wages Stagehands wages Ticket booth personnel and ushers wages scenery, costumes, and props Theater hall rent $ 216,000 32,400 16,200 108,000 54,000 27,000 12,000 43,200 $ 508,800 Printed programs Publicity Administrative expenses 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 The Lion King 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. The theatre company is considering charging $50 per ticket, which will maximize attendance at 140 attendees per performance. The theatre company is also considering charging $60 per ticket, however attendance is expected to decrease by 16% if it increases the pricing. This pricing calculation is predicated on six productions and 108 performances. After consideration, the board of directors of the theater is considering expanding the theater's program to seven productions and a total of 168 performances. If the theatre company puts on 7 productions and 168 performances, the expected number of attendees per performance will decrease, if the price structure is kept the same as 6 productions and 108 performances. If producing 7 productions and 168 performances, $60 per ticket is expected to draw on average 98 attendees per performance. The theatre company is also considering charging $50 per ticket, which will increase attendance on average 22% over the $60 ticket price. The Children's Theatre company has asked for your expertise to help determine the level of production to pursue Required: 1. Prepare a flexible sales budget report for the year showing the four pricing levels and expected ticket volume. 2. Prepare a flexible budget cost report for the year showing the two levels of production. )I 3. Prepare four budgeted income statements, one for each level of production at a giver price structure. 4. Which performance and ticket price structure would you advise the Children's Theatre Company to utilize? 5. See next page... Following your meeting, the Children's Theatre Company has decided to produce 7 shows and 168 productions. The revenue budgets were exactly correct. At the end of the year actual costs appear below: The Children's Theatre Actual Costs For the Year Ended December 31 Actual number of productions Actual number of performances 168 341,800 49,700 25,900 130,600 78,000 38,300 15,100 47,500 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 $ 726,900 Required: 6. Prepare two income statements, one for each pricing schedule and production costs at 7 productions and 168 performances. Did your recommendation work out?

Answer 1

The Childern's Theatre Flexible Budget For the Year Ended December 31 9 10 Amount $ Particulars 12 Actual number of productions 13 168 Actual number of performances 14 Actors' and directors' wages 336,000 (216000/108 168) 50,400 (32400/108*168) 25,200 (16200/108*168) 126,000 (108000/67) 84,000 (54000/108*168) 42,000 (27000/108*168) 14,000 (12000/67) 46,680 (43200*0.75)+(43200 0.15)/6 7+(43200 0.1)/108 168 724,280 15 Stagehands' wages 16 Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent 17 18 19 Printed programs Publicity 20 21 Administrative expenses Total expense 23 24

The Childern's Theatre 29 Flexible Budget Performance report 30 For the Year Ended December 31 31 32 Particulars Planning Flexible Activity Budget Spending Actual Results Budget Variances Variances 34 35 Actual number of productions Actual number of performances 36 108 168 168 37 341,800 49,700 25,900 130,600 216,000 336,000 120,000 (UF) 5,800 (UF) 2,400 50,400 18,000 (UF) 16,200 25,200 9,000 (UF) 08,000 126,000 18,000 (UF) 4,600 (UF) 54,000 84,000 30,000 (UF) (6,000) (F) 27,000 42,000 15,000 (UF) (3,700) (F) 12,000 14,000 2,000 (UF 1,100 (UF) Actors' and directors' wages Stagehands' wages Ticket booth personnel and ushers' wages Scenery, costumes, and props Theater hall rent 38 (700) (F) 700 (UF) 39 40 78,000 42 Printed programs Publicity 38,300 43 15,100 Administrative expenses43200 46,680 3480 (UF) 820 (U 47500 Total expense 45 2,620 (UF) 508,800724,280 215,480 (UF) 726,900 46 47